(no title)
necubi | 4 days ago
> Look, I am sorry. But if you go to Jump Trading and Jane Street and say “hello, I have an unregulated poorly designed mechanism that could lead to $50 billion of market value collapsing overnight, would you like to trade with me,” they are going to say yes, but their eyes are going to light up, you know? If at Time 0 you give them an extremely gameable system that can produce billions of dollars of profit, at Time 10 your system is going to be a smoking wreckage and they are going to have billions of dollars of profit. That’s their whole job, you know? I couldn’t tell you in advance what all the intermediate steps will be, and in fact in hindsight I cannot tell you what the intermediate steps actually were, how Jump and Jane Street made money off the collapse of Terra. But as a heuristic, I mean, come on. Terra was like “hello we have a balloon full of money, here is a pin, dooooooon’t pop the balloon.” Guess what!
bsder|4 days ago
bb88|4 days ago
https://www.wsj.com/finance/currencies/jane-street-accused-o...
That point was the crux of Matt Levine's argument: Terra and Luna were unregulated and easy-to-game securities. So you can't complain when the smartest people on Wall Street figured out how to pop the balloon in their favor -- (not ai emdash) particularly when it's their job.
I will quote the first few paragraphs leading up to it though:
>The basic story of Terra is:
>Terra was a big crypto project, led by a company called Terraform Labs and a guy named Do Kwon, which at its peak had a market value of about $50 billion.
>It had a token, the currency of its blockchain, called Luna, which at its peak traded at almost $120 per token. It also had an algorithmic stablecoin, TerraUSD, whose mechanism was that it could always be redeemed for $1 worth of Luna.
>That’s a bad idea! The problem, which was extremely obvious and which everyone knew about, was that, if people lost confidence in Luna, there would be a death spiral: People would redeem TerraUSD for Luna and sell the Luna, which would drive down the price of Luna, which would lead to more redemptions, which would create even more Luna, until Luna was trading at a tiny fraction of a penny and every TerraUSD would be redeemed for millions of them.
>In May 2022 that very much happened. Terra collapsed, people lost a lot of money and Do Kwon got 15 years in prison for fraud.
>At its peak, though, Terra was a pretty big crypto project, and it had various dealings with some very smart and somewhat sharky trading firms like Jump Trading and Jane Street.