South Korean cryptocurrency king Do Kwon speaks publicly for the first time since his “baby” crash. A 2.0 version has been released.
He will have done losing $40 billion to investors, and over $500 billion in the cryptocurrency market. Do Kwon, 31, co-founder of TerraUSD, admitted he was “wrong” after a “brutal” collapse of his stablecoin. “I think the best way to heal the wounds is just to be honest and admit that I was wrong,” the South Korean youngster told the media for the first time since the terra crash. specialist Coinage from Singapore.
It all started well though. In 2018, this Stanford graduate, who went through Apple and Microsoftlaunches its cryptocurrency with one idea in mind: use blockchain technology to develop a more efficient payment system. To do this, he wants to base himself on a so-called stable cryptocurrency, the price of which is in principle linked to that of a traditional currency (usually the US dollar), which guarantees investors a certain durability in the very volatile universe of cryptocurrencies.
And the beginnings are promising. Do Kwon manages to raise nearly 40 billion dollars from renowned investors such as Polychain Capital or Arrington XRP.
In April 2022, the value of terra reaches its highest. According to CoinMarketCap, it is the fourth largest stablecoin and tenth largest cryptocurrency by market value. But things will start to go downhill. A month later, terra loses more than half of its value in 24 hourssowing a wind of panic in an already feverish crypto-asset market.
“A warning for all investors”
Very soon, the stablecoin and its twin token Luna fall to zero, leading to losses of more than $500 billion in the market.
The stability of some so-called stable cryptocurrencies is not ensured by currency reserves, but by an algorithm that performs arbitrations based on the supply and demand of another cryptocurrency. This is the case of terra, which is backed by the cryptoasset developed by the Luna Foundation Guard. However, this token also collapsed. The domino effect is immediate: investors panic and try to withdraw their money.
“The Terra/Luna case should serve as a wake-up call to all crypto-asset investors.”
Critics had long warned against this system which they believed structurally failing. In fact, each time a terra token was created, part of the Luna cryptocurrency had to be destroyed in order to maintain its backing to the dollar.
And to keep up demand, Do Kwon’s company, Terraform Labs, offered juicy interest rates. Ponzi scheme, denounce the detractors. “If demand collapses, then the price will fall to zero,” said Hilary Allen, professor of financial regulation at American University, to AFP.
As a result, many small investors lose all their savings.
“It is a feature of almost all cryptoassets, and therefore Terra/Luna should serve as a warning to all investors (entering the market of) cryptoassets,” notes Hilary Allen.
South Korean authorities have since opened several criminal investigations around this case. Last month, South Korean prosecutors raided the home of co-founder Daniel Shinsuspected of illegal activities behind the collapse of terra.
“I’m always going to do things around Terra and for the Terra community. This is my home and it’s where I feel there’s the greatest future.”
The authorities have also prohibits key former and current employees of Terraform Labs from leaving the country and asked Do Kwon to inform them of his return.
But in his interview with Coinage, the entrepreneur claimed not having been contacted by prosecutors and that he had not decided whether he would return to South Korea to cooperate. “It’s a bit difficult to make this decision, because we have never been in contact with the investigators,” he said, adding, “They never accused us of anything.”
A few weeks after the collapse of Terra, he launches Terra 2.0 who nevertheless meets the same destiny as its predecessor: its value falls very quickly from 11 dollars to 2 dollars.
Despite his mea culpa, Do Kwon says he still believes in his cryptocurrency. “I’m always going to do things around Terra and for the Terra community,” Kwon continues to say. “This is my home and this is where I feel there is the best future.” But with multiple ongoing investigations, analysts say Do Kwon’s plans for the future are unlikely to materialize.