TerraUSD crash led to vanished savings, shattered dreams • Hacker News Board

Re: TerraUSD crash led to vanished savings, shattered dreams

#171

Post by charlie0 » Wed, Jun 22, 2022, 5:24 AM UTC

lmwnshn wrote: post #166

effingwewt wrote: post #144

Earlier quoted context omitted.

Too true. This is why lottery tickets are called 'poor people savings'. It's especially bad in Mexican communities. I've seen so many buy them, scratch them at the counter, and go back for more. Sometimes they don't even play the 'game' they just scratch the barcode and scan them. No method, just hope. You can see the fever in the eyes sometimes, no different than casino slot pullers, or a drug addict getting a fix.…

I think you're thinking of a ROSCA [0], e.g., from Poor Economics [1], > In Africa, the most popular instruments are rotating savings and credit associations (ROSCAs) - more commonly known as "merry-go-rounds" in English-speaking Africa and as tontines in Francophone countries. ROSCA members meet at regular intervals, and all deposit the same amount of money into a common pot at every meeting. Each time, on a rotatin…

Yeah, it's basically an interest free loan for all participants in it, opportunity cost notwithstanding.

Re: TerraUSD crash led to vanished savings, shattered dreams

#172

Post by andrewstuart » Wed, Jun 22, 2022, 5:24 AM UTC

There's nothing at all wrong with crypto if you understand it is a ponzi scheme and nothing more.

With that understanding, you now know how to play the game - which is to say you MUST get out before the ponzi collapses.

Your job as investor/gambler is to get in while the house of cards is starting to be built, and to get out before the Jenga tower collapses - and it definitely will.

If however you play crypto and tell yourself how it's changing society, crypto has real value, the blockchain will change the world and all that sort of garbage, then you'll lose because you don't understand the fundamental system at play, which is the ponzi mechanism, with nothing at all underpinning the "investment'.

If you truly understand it is a ponzi scheme then it's quite exciting - an open, legal, consensual, highly organised globally distributed ponzi scheme - that's something entirely new.

Re: TerraUSD crash led to vanished savings, shattered dreams

#173

Post by wmf » Wed, Jun 22, 2022, 5:27 AM UTC

MBCook wrote: post #116

wmf wrote: post #69

Earlier quoted context omitted.

The reporting is skipping some steps. You'd buy UST then deposit it into a "separate" bankish thing called Anchor which would pay you 20% APR. The interest was supposed to come from Anchor loaning out your UST at a higher rate. This would be sustainable in theory, but they were actually paying interest out of their marketing budget to bootstrap the Terra/Luna/Anchor "ecosystem".

So I take my coin, pegged to the dollar, and lend it Anchor for a 20% return. Anchor lends it out to someone else at >20% APR because that other person is… brain dead? Who would accept that? But again, where do the new Terra coins come from? If Anchor pays me in more stable coins, they had to buy USD to be allowed to mint them right? Does that mean I bought Terra with USD to allow Anchor (which is Terra?) to sell my…

Anchor lends it out to someone else at >20% APR because that other person is… brain dead?

They're probably crypto speculators looking to lever up. If crypto could double in one year then borrowing at 25% isn't crazy.

where do the new Terra coins come from? If Anchor pays me in more stable coins, they had to buy USD to be allowed to mint them right?

Terra was pegged to $1 but it wasn't backed by USD. Terra was backed by Luna and it was possible to convert Luna to Terra without any USD being involved. People called this out as unsafe in 2021.

Why not just take USD to lend USD to get USD to return USD?

I'm not sure regulators would allow anyone to do this kind of lending in the real banking system.

I’m ignoring answers like money laundering and avoiding KYC and other financial regs.

Don't ignore it. The purpose of a lot of DeFi is to allow people to do things that regulations don't allow.

And again who borrows money, probably denominated in some crypto, at >20%? ... You’d need those people for this to work?

AFAIK Anchor never had enough borrowers to sustain itself. I suspect the long-term plan was to draw in deposits with the 20% rate as a teaser, then lower rates over time and hope depositors stayed due to inertia. Other lenders like BlockFi and Crypto.com offer have also lowered their rates multiple times over the past 18 months.

I'm not trying to defend Terra/Luna/Anchor here; it was always doomed and it failed. But it wasn't obviously doomed; only a few people did the math that showed the danger. If you only look at the surface it looks like it works.

Re: TerraUSD crash led to vanished savings, shattered dreams

#174

Post by dougSF70 » Wed, Jun 22, 2022, 5:28 AM UTC

WalterGR wrote: post #103

gruez wrote: post #95

Earlier quoted context omitted.

>I agree, which is why everyone who lives off an income rather than assets (which is ~99.5% of us) I think you're greatly underestimating how many people can "live off [...] assets". This page shows household net worth by percentile[1]. Based off that, you can probably live off investments starting at around the 90th percentile ($61k annual income with 5% withdraw rate), if you live modestly in a low CoL state. Once…

> Based off that, you can probably live off investments starting at around the 90th percentile ($61k annual income with 5% withdraw rate), if you live modestly in a low CoL state. I don't understand how that math works. Could you break it down for me?

The theory goes that a 4.5% draw rate from your capital will ensure your capital is preserved (relative to inflation average of 2.5%) for ever provided it grows at 7% a year in the long run. This is an achievable long term capital growth rate.

If you can live of $61k a year then you will need 61,000 / 0.045 = $1,355,555 of investments to deliver $61k a year without degrading the value of the capital relative to inflation.

I guess the 90th percentile refers to the fact that 10% of people in the US have this amount invested or more.

Re: TerraUSD crash led to vanished savings, shattered dreams

#175

Post by 1024core » Wed, Jun 22, 2022, 5:28 AM UTC

> In the coming days, investors burned by the crash may receive funds in a new cryptocurrency, partly compensating their losses. Mr. Kwon and his fellow developers have said they are creating the new cryptocurrency as part of a reboot of the Terra blockchain network.

Great. Whatever few cents are left will now be lost to this new scam from "Mr. Kwon".

Re: TerraUSD crash led to vanished savings, shattered dreams

#176

Post by gonehome » Wed, Jun 22, 2022, 5:33 AM UTC

Lots of noise in the crypto space and the HN comments are always bad.

BTC and ETH are the interesting and worth putting a small percentage of your holdings into (BTC [0] as an international store of value that has benefits over gold, ETH as the core programmable token that backs anything that stores stuff on chain to manage decentralized state). Vitalik is earnest and his writing is pretty great. Everything else I'd probably avoid (except to play with). ZCash's privacy protections are pretty cool. Outside of that risk is extremely high. Lots of bad actors, but also a pretty cool new technology with a new capability for self-custody. If someone tells you you can make 20% risk free returns, they're lying to you.

I feel bad for people that lose everything making dumb bets. It's why all the institutional investor rules exist. It's why there are restrictions on trading with leverage. Still, it's annoying that I'm prevented from making bets (or investing in startups) because of people like this. I understand the purpose of the regulations and clearly there's a need, but it's still annoying.

[0]: https://www.matthuang.com/bitcoin_for_the_open_minded_skepti...

[1]: https://vitalik.ca/

Somewhat related this article was pretty interesting: https://www.lynalden.com/what-is-money/

Re: TerraUSD crash led to vanished savings, shattered dreams

#177

Post by musicale » Wed, Jun 22, 2022, 5:34 AM UTC

Animats wrote: post #7

Oh, no. They had feeder funds. Stablegain [1] was feeding money into them: You can now earn up to 15% APY interest on your cash with Stablegains. This is 30x higher than in your traditional bank. You can deposit and withdraw using your preferred methods (ACH, wire transfer, USDC) with the help of our partner Circle. There are no long-term lock-up periods. Earn passive income every day We take care of all technical as…

I'd never heard of stablegains before. So it was basically YC-funded fraud?

Re: TerraUSD crash led to vanished savings, shattered dreams

#178

Post by SilasX » Wed, Jun 22, 2022, 5:36 AM UTC

phailhaus wrote: post #6

ntoskrnl wrote: post #5

> TerraUSD was touted as a blue-chip cryptocurrency. Let me stop you right there. Terra was a barely 2 year old shitcoin. I don't think you know what "blue-chip" means.

Who are you talking to? WSJ is correct: it was touted as blue-chip. It was not.

Yep, just two months ago there was the announcement about Curve creating the prestigious 4pool of four stablecoins, which included TerraUSD and excluded DAI, sparking a rivalry, in which a DAI founder called the former a Ponzi.

https://old.reddit.com/r/CryptoCurrency/comments/tv1ejs/batt...

Re: TerraUSD crash led to vanished savings, shattered dreams

#179

Post by semi-extrinsic » Wed, Jun 22, 2022, 5:38 AM UTC

KMag wrote: post #98

gruez wrote: post #68

Earlier quoted context omitted.

Do people actually think this? ie. "it's not investing unless there's a chance of you making 10x returns"?

In my experience, it doesn't seem to be the chance of big returns, but rather the gut feeling of actively "doing something" to invest, vs. a very passive simple strategy of dollar cost averaging a low-fee broad index ETF. I think particularly in popular American culture, we often feel like it's more moral to actively make every penny, and have an aversion to passively earning money. Landlords are demonized, etc.

Yeah, this is bang on the money. And of course the financial institutions who make more money in fees when people are active vs. passively holding an index for decades, do what they can with marketing to support this idea.

Re: TerraUSD crash led to vanished savings, shattered dreams

#180

Post by dehrmann » Wed, Jun 22, 2022, 5:42 AM UTC

dubswithus wrote: post #54

> Keith Baldwin, a 44-year-old surgeon who lives outside New Bedford, Mass., saved $177,000 during the past decade. Last year he took his savings and bought USD Coin, putting it in a crypto account that paid a 9% annual yield. A surgeon saved 177k over 10 years? Something else might be going on here.

It also feels like a surgeon should have known better. Not because this is something he studied, but he's obviously halfway intelligent, so he has less of an excuse for not knowing better.