While the idea of ​​creating an algorithmic stablecoin seems promising, the collapse of the Terra ecosystem has shaken confidence in the DeFi industry and the cryptocurrency market in general. This was announced by Mike Novogratz, founder of Galaxy Digital.

After much reflection, it’s time to talk about the past week, and more importantly, the weeks ahead. https://t.co/m2pnzpe9Lu

— Mike Novogratz (@novogratz) 18 May 2022

Galaxy Digital, led by Novogratz, became one of the investors of Terraform Labs, which developed the Terra ecosystem. And the senior executive strengthened this tattoo on his left arm, making it among the so-called “LUNAtics”.

I’m officially a Madman!!! thanks @stablekwon And thank you to my friends at Smith Street Tattoos. pic.twitter.com/2wfc00loDs

— Mike Novogratz (@novogratz) January 5, 2022

In a letter to the organization’s employees, Novogratz said that the interests of the company would not be affected. He added that Cryptobank has a margin of safety in terms of both liquidity and capital. Novogratz attributed the Terra debacle to the impact of macroeconomic factors.

According to the CEO of Galaxy Digital, low rates in traditional markets created an explosion in demand for UST with an 18% efficiency in the Anchor protocol, which left out other use cases for Terra. With the withdrawal of stablecoins, further pressure on reserve assets has caused a similar stress to the banking panic.

“The reserves were not enough to prevent the collapse of the UST. In retrospect, everything always seems clearer. My tattoo will be a constant reminder that venture capital requires humility.”Novogratz agreed.

For the senior executive, the collapse of Terra USD was another reminder of the need to follow the following investment fundamentals:

• portfolio diversification;
• partial profit determination;
• risk management system;
• understand the macroeconomic background.

Many private investors can avoid “heartbreaking losses” if they don’t invest more than 1-5% of their savings in an asset. Novogratz emphasized that only funds that are psychologically ready to lose should be used.

The senior executive predicted that conditions in the cryptocurrency market will continue to be difficult in the near future. This does not change his mind about positive future prospects.

Recall that the CEO of Galaxy Digital warned of threats to support the $30,000 for Bitcoin and $2,000 for Ethereum levels.

Previously, Forbes described the collapse of UST and LUNA as the “fifth reboot” of the crypto market.