These lucky investors exited just before the Terra crash making huge money

  • Pantera Capital’s decision to book profits at 100x gains came from their risk management principles and fund rebalancing.
  • CMCC Global said that their decision to sell LUNA was majorly due to the regulatory issues and concerns around UST stablecoin.

The Terra ecosystem crash earlier this month wiped out over $60 billion of investors’ wealth in total. Several retail and institutional players lost a fortune in this Terra crash, however, some investors were lucky enough to take an exit right before the collapse.

A CNBC report shares some of the companies that made a fortune from Terra. For e.g. Venture Capital giant Pantera Capital has made a fortune and nearly 100x return on its $1.7 million investment in LUNA. Hack VC took an exit last December 2021 when LUNA was around its all-time high above $100.

Similarly, Winklevoss-backed GMCC Global made an exit in Mach 2022, however, didn’t share their exact gains. Speaking to CNBC, Pantera Capital’s co-chief investment officer Joey Krug said they sold 87 percent of their position in LUNA in the time period between Jan 2021-April 2022.

Pantera’s strategy of risk management

It sold another 8 percent in May when it found that UST had lost its dollar peg. Krug said his company “got stuck” with the rest 5 percent. All in all, they netted $171 million in realized gains from their $1.7 million investment. Krug further added that their decision to sell came from simple risk management and fund rebalancing. He added:

For the large portion which we sold over 2021 and part of 2022, it was a really simple risk management reason. It kept becoming a larger and larger part of the fund and so we had to de-risk it since you can’t really run a liquid hedge fund with one position being a super large portion of the fund.

Krug added that when his company noticed UST losing $1 peg, it sold again. “It was really just seeing the peg break by a few cents and pattern matching it to historical currency pegs. So basically, you want to sell it so you don’t end up getting diluted,” explained Krug.

Concerns over Terra’s due diligence

Hong Kong-based venture firm CMCC Global was an early investor in LUNA back in 2018. Speaking to CNBC, CMCC Founder Martin Baumann said that they divested their stake in March because of concerns relating to Terra’s due diligence.

He added that their decision to sell partly came from the tech behind UST. However, the major weightage in their decision was more to do with regulation. Baumann said:

As opposed to asset-backed stablecoins, which are derivatives of existing USD in circulation, UST was effectively increasing the money supply of USD in existence. We figured, while an interesting concept, regulators would not tolerate tampering with money supply of the USD.

CMCC Global sold its LUNA when it was trading at around $100. Hack VC partner Rodney Yesep didn’t speak to CNBC about their gains. However, Yessep recently appeared in an interview wherein he said that they were seed investors in Terra back in the day. “We were no longer holding a position by the time the downturn happened, but a lot of people were, and a lot of people were pretty impacted,” he added.

Related: Another profound dip? Terra 2.0 sinks by more than 70% days after launch

About Author

Bhushan is a FinTech enthusiast and holds a good flair for understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In his free time, he reads thriller fictions novels and sometimes explores his culinary skills.

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