(0:01:50) Kevin Zhou is the founder of crypto quant fund, Galois Capital and former head of trading at Kraken. It’s been a wild few days in crypto and Kevin is here to help us get our heads around what the hell just happened. We saw Terra, one of the most prominent ecosystems in crypto, effectively disintegrate over less than a week. Its native token Luna had over $40 B in market cap at its peak, and nearly all of it was wiped out while UST, which was supposed to be a stablecoin worth $1 crashed to. It was a historical moment in crypto as never before had a project that big, crash so hard, so quickly. Kevin was one of the few who saw it coming and predicted the fall just a couple of months ago. What were some of the red flags that helped him spot the fallout?
- The once prominent ecosystem Terra, disintegrated in the last week.
- Its native token Luna, with a peak market cap of over $40 billion crashed along with UST, an alleged stablecoin.
- No project of this scale in crypto history has crashed so hard, so quickly.
- Kevin Zhou is the founder of crypto quant fund & Galois Capital, helps us navigate this shockwave to space.
(21:42) When it comes to fiat currency like the US dollar, there is intrinsic demand propping up its value stemming from trade, foreign countries borrowing in dollars and using dollars in their central bank reserves. Luna, the token backing the UST stablecoin, did not have such strong demand, and that ultimately led to its downfall. Can this mistake be corrected? Is there any hope for algorithmic stablecoins?
- Fiat currencies like the US dollar garner demand, stemming trade and borrowing.
- Luna, did not garner that same demand which eventually led to its downfall.
- What does this mean for algorithmic stablecoins?
(40:49) Terra’s collapse has caused shockwaves in crypto. Where are those ripple effects being felt the most? Does Kevin see any other project subject to the same level of risk? And will the real economy be affected at all?
- An event of this magnitude, will cause shock waves to the space.
- How will this affect projects in the medium to long term?
- Also with this scale of loss, will the real economy feel the squeeze?
(51:18) Dramatic volatility like we’ve seen in the past free weeks is common in crypto and the space has gone through bull runs and bear markets throughout its entire lifetime. Like all past bear markets, Kevin believes this one will also be a chance for the space to shake out opportunists and crash grab projects, while the most committed teams stick around to build actually great projects. But there are some key differences, including how interconnected crypto now is thanks to DeFi, and the effect of powerful macro headwinds. So how long and severe does Kevin expect this bear market to be?
- Bear markets are nothing new to this space, and the volatility is a familiar feeling.
- Kevin believes this one will shake the tree, removing opportunists and cash grab projects.
- How long does Kevin think this bear market will run for, and how severe will it be?