Terra LUNA and UST Crash: QOZB Capital’s Position

QOZB Capital has zero asset exposure to UST or LUNA.

QOZB Capital’s founders and managers have had years of experience within crypto and seek to build its business model around stablecoins that have a full float of tangible and redeemable value.  Stablecoins such as Tether, which is collateralized, and UST have an arguably functional flaw within them, in that they are all pegged to the value of assets backing them, rather than directly redeemable for U.S. dollars in federally insured accounts.  While portions of their reserve may be U.S. dollars, they are also collateralized with other assets that are often not fully disclosed.  

With our understanding of these conditions, QOZB Capital only deploys and leverages stablecoins that can actually be redeemed.   Ensuring that capital is in a secure and yield friendly environment is what QOZB Capital does and will continue to do.

The recent crushing of Terra LUNA and UST has solidly demonstrated that market fundamentals still affect the cryptocurrency ecosystem. A current theory on contributing factors consists of the following:  a combination of BTC shorts, liquidity manipulation, and billions of dollars to drain new project liquidity.  UST began its de-pegging from its reserve by liquidating at a much lower price than evaluated at in addition to massive sell pressure from their savings protocol, Anchor.  The collateral fell drastically in value and liquidity pools were drained from the attackers exiting their original positions.  The culprits of this market manipulation are still not known, but one thing is certain, that fully algorithmic stablecoins have proven to be unstable.  Not only this, the founder of LUNA and UST allegedly helmed another failed stablecoin protocol known as Basis Cash.  

In this relatively new environment, diligent research must be conducted when it comes time to deploy, in particular when others place their capital with asset managers.  Since the beginning of the Terra LUNA fiasco, Tether, whose backing is unclear, was also temporarily depegged.  The market is demonstrating that algorithmic and collateralized backing will continue to be an issue with whale investors knowing they can be disruptors.   The attack has been compared to the Black Wednesday attack, showing that perhaps the issue is not just algorithmic backing, but poor monetary structuring, planning, and predatory attackers waiting for any weaknesses available