Expensive lessons from the $LUNA crash




4 months ago


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The $UST $LUNA capitulation has been a humbling experience for many of us. What really matters is what you learn from it. Here are some expensive lessons I'm taking away to get back on track. #NFA 🧶 /

*Never* put in more than you can afford to lose. Don't put your pension, college tuition, or mortgage into crypto. Never leverage yourself. Crypto is risky — no matter how much you believe in it, it's never worth trading off your life goals.

Diversify your holdings. *Never* put more than 1/3 of your portfolio in one asset, no matter how safe you think it'll be. There's always a chance that it'll go to zero, and no matter your time horizon you can't afford to lose that much. Just not worth it.

Keep a cash cushion as dry powder. Don't underestimate the peace of mind that only cash — not stablecoin — can give you. Focus on maximizing your cashflows and diversifying income before even investing.

Do the opposite of everyone else. When markets reach all-time highs, just take profits and rotate them into less risky assets. When things crash, use your cash to buy. When you feel the greed in your guts, put it to bed. *Sell*. Imagine selling 1/2 of your $LUNA at $120.

Have an exit strategy before you enter a position. Before buying an asset, decide: • A price goal that determines your exit (eg. 2x) • Where you're going to rotate the asset when the goal is reached (eg. $BTC) • What to do if things go south (eg. go back to 1-2)

Take profits every quarter. Regularly reap the fruits of your investments — take out a fixed amount, spend it on things you like, and do pay taxes on it. It's not worth over-accumulating to sacrifice your life in the name of delayed gratification, which is actually greed.

*Never* become a maxi. Social feeds are designed to reinforce specific opinions until you become polarized first, then delusional. Believing in a project doesn't mean becoming a soldier — this prevents you from doing 2-6. Be a scout instead.

Challenge your investment thesis every quarter. Every time you take profits, take 1-2 weeks to: • Actively DYOR vulnerabilities in your holdings • Chat directly with non-believers • Re-balance your risk-reward based on your findings This should help you execute on 2-7.

Hope for the best, plan for the worst. Always plan a black swan scenario — the @terra_money implosion shows these events are possible, especially in crypto. Re-read these books to plan accordingly. https://www.amazon.co.uk/Black-Swan-Impact-Highly-Improbable/dp/0141034599 https://www.amazon.co.uk/Antifragile-Things-that-Gain-Disorder/dp/0141038225

Smart doesn't equate to infallible. It's known that smart folks like the ones at the helm of @terra_money @delphi_digital can generate enormous conviction and momentum. This doesn't make them infallible, but it might make you become a maxi. Step out and go back to 2-9.

Examine the leadership's values. When investing in early-stage, VC-backed projects, you invest mostly in their leaders — ensure their values are somehow aligned with yours. Humbleness >> hubris, no matter how smart leaders are. This informs 7-10. https://twitter.com/ZakaWaqar/status/1525257656306376706

Give yourself and others a second chance. No doubt Do Kwon created something incredible and did mistakes in the process. This shouldn't prevent you to discount $LUNA 2.0 attempts but should reinforce your due diligence when executing 2-11.

Distinguish b/w artificial demand & product-market fit. @anchor_protocol (~80% of Terra's TVL) masked a heavily subsidized demand for genuine NFX. The more concentrated/bigger this artificial demand, the harder it is to bail out if it goes south. https://taschalabs.com/5-lessons-from-terra-luna-fallout-for-future-stablecoin-designers-investors-and-regulators/

Sometimes forests need fires to stay healthy. Failure is needed for us to internalize our learning and iterate on our mistakes. If you practice 1-9 well, you'll avoid getting (too much) burnt (thx @coinbureau for the metaphor). https://www.nrcan.gc.ca/our-natural-resources/forests/wildland-fires-insects-disturbances/why-forests-need-fires-insects-and-diseases/13081

A decentralized economy needs decentralized money. The $LUNA attack narrative was free marketing for decentralized money, as seen by @stablekwon and @terra_money accounts doubling in size overnight! I remain very bullish, but we might not be ready for the whole thing yet.

To recap: 1. Never put in more than you can afford to lose 2. Diversify your holdings 3. Keep a cash cushion as dry powder 4. Do the opposite of everyone else 5. Have an exit strategy before you enter 6. Take profits every quarter 7. Never become a maxi

8. Challenge your investment thesis every quarter 9. Hope for the best, plan for the worst 10. Smart doesn't equate to infallible 11. Examine the leadership's values 12. Give yourself and others a second chance 13. Sometimes forests need fires to stay healthy

14. Distinguish b/w artificial demand & product-market fit 15. A decentralized economy needs decentralized money

The bigger the crisis, the bigger the opportunity to find more resolve, and bounce back stronger. Stay safe out there. #LFG #WAGMI