Galaxy Digital CEO called the reason for Terra’s collapse

What’s new? Galaxy Digital CEO Mike Novogratz has spoken out about the collapse of the Terra blockchain ecosystem. The entrepreneur said that the global macroeconomic situation was the cause of the rate collapse of the TerraUSD (UST) stablecoin and its backing token LUNA. He added that the collapse of Terra “dented confidence in crypto and DeFi.”

A letter from our Founder and CEO, @novogratz. pic.twitter.com/1jOpFyTlvb— Galaxy Digital (@GalaxyDigitalHQ) May 18, 2022

What else did Novogratz add? The entrepreneur revealed that Galaxy invested in Terra because of its solid fundamentals.

“What’s important to understand about Terra/Luna is that the mechanism that was intended to keep UST stable was public, transparent, and hotly debated in many forums. UST was an attempt at creating an algorithmic stable coin that would live in a digital world. It was a big idea that failed.” Novogratz writes.

Back in January 2022, the head of Galaxy Digital tattooed himself with LUNA after his company invested in the project. In his statement, Novogratz writes that his tattoo “will be a constant reminder that venture investing requires humility.”

In January, billionaire Mike Novogratz showed off a new $LUNA tattoo. Five months later, the cryptocurrency crashed 100% to $0. pic.twitter.com/CnoqEVBn5e— Watcher.Guru (@WatcherGuru) May 14, 2022

What did Novogratz advise investors? The entrepreneur has highlighted a few points that he believes form the basis of the principles of investing:

1. Keep a diversified portfolio
2. Take profits along the way
3. Have a risk management framework
4. Understand that all investments happen in a macro framework

Who is Mike Novogratz? He is an American trader and investor. In 2018, after leaving investment bank Goldman Sachs, Novogratz founded his own digital asset management company, Galaxy Digital.

What happened before? Parallel to the head of Galaxy Digital, billionaire Bill Ackman spoke out about the Terra situation. He compared the collapse of the blockchain to the collapse of a pyramid scheme. According to Ackman, the price of the native token LUNA was only supported by demand from new investors and the limited supply of available coins.

In April, Mike Novogratz called the key condition for bitcoin’s growth. According to him, the first cryptocurrency would start to grow if the Fed eased its policy on regulating the industry. In that case, the price of bitcoin could reach $500 000 and subsequently reach $1 million, the businessman believed.