Mike Novogratz now admits that the Terra model was unsustainable

Mike Novogratz. Source: screenshot from a YouTube video

digital galaxy CEO Mike Novogratz has said that while he was “concerned about the macro environment,” he expected Bitcoin (BTC) to “stay in the $30,000 to $50,000 range.” At the same time, he argued that the model on which his once-favorite cryptocurrency Terra (LUNA) was built was unsustainable.

The comments surfaced in an interview with New York Magazine published on Sunday.

Despite the comment mentioned above, Novogratz argued that things need to be put into perspective: between buying zoom stocks and buying bitcoin at the start of the COVID-19 pandemic, he said, “today you would have doubled your money in bitcoin and won nothing on Zoom.”

The CEO added that,

“So that’s what I think is hard for people to understand. This has been a complete and utter thrashing of the old school. But it’s important not to throw the baby out with the bath water because we had a speculative mania in a lot of asset classes. Bitcoin is not going away as a macro asset.”

However, looking at the data, at the beginning of 2020, BTC was trading at around $29,500, rising rapidly. Today, in the middle of the crypto winter, it is at $21,423. In November 2021 it reached its all-time high of $69,044. At the same time, Zoom was trading around $70 at the start of 2020, it currently sits at $122.

Novogratz, who was one of the main investors in Terra’s collapsed ecosystem, also admitted in the interview that “in hindsight” he was running an unsustainable business model.

“In hindsight, looking at Luna, you can’t offer people 18 percent interest, like they did with Luna. Anchorand not letting the world bump into yours,” Novogratz said, referring to the Terra-based loan and lending protocol that offered users returns of up to 20% on terraUSD (UST) deposits.

As for the near-term future of cryptocurrencies, the CEO of Galaxy Digital added that,

“I think the speculative frenzy part is over for now. So it becomes a much more sober business of having to build things that people use.”

When asked if it is now “over for [decentralized finance] DeFi,” Novogratz argued that the protocols in the space “for the most part, [have] worked”, although now everything “is worth much less”.

“Where the big losses are, it’s really in this weird mix of CeFi (centralized finance) and DeFi,” he said, pointing to the two centralized lending and lending companies. Celsius (CEL) and BlockFi as examples of companies that have faced difficulties.

“Celsius and BlockFi were black boxes where investors put their money and then did what they wanted with it. It wasn’t chained. You didn’t know what the leverage was unless you got under the hood,” he said, comparing the companies to how some banks operated before the 2008 financial crisis.

He went on to say that Luna and Terra were “a little bit different” because the model they operated on was transparent. Still, the model was largely based on a combination of investor greed and “a very charismatic founder,” he said, admitting that UST’s parity was “based on optimism.”

“[W]hen the market changed, the mechanisms to create that peg just didn’t hold up to the pressure,” Novogratz said.

Meanwhile, commenting on his own company’s performance during the crypto market downturn, Novogratz stated that ideally he should have sold more.

The CEO stated that the company “did some really, really good things” over the past year selling crypto, some private equity, and “some of our venture stuff.”

“We took a lot of chips off the table, but we left a lot of chips on the table. And if I had been that smart, I would have sold more,” he said, adding: “If you’re in the job, I’m in for 30 years, you don’t like it.” lose”.


Learn more:
– Once the Fed pauses, Bitcoin will ‘go to the moon,’ says Novogratz
– Get ready for ‘really volatile’ 6-12 months in the crypto regulatory sphere – Novogratz

– A curious coincidence: the main sponsors of Terra break the silence on the same day
– Novogratz goes silent after the cryptocurrency he promoted falls

– CEL Token Soars as Celsius Shareholder Proposes Recovery Plan, Celsius Pays Compound
– BlockFi Secures $250M FTX Line of Credit from Bankman-Fried

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