Pantera Capital, one of Terraform Labs’ top-tier backers, paid off nearly 80% of its investment in Terra (LUNA) well before TerraUSD (UST) collapsed last week.
“The market has been pretty bubbly over the last year and as such we had exited the majority of our positions before this happened,” Joey Krug, co-chief investment officer at Pantera Capital, told The Block. “About 80% in the last year, fairly gradually over time.”
Pantera Capital has invested in Terraform Labs at least twice – once to support its $25 million round in January 2021 and then to participate in its $150 million ecosystem fund round in July 2021. As of the publication of this article, Krug cleared that Pantera’s LUNA investments were separate from its investments in Terraform Labs and occurred in the summer of 2020 following LUNA’s market debut.
“We reduced this position over time as it became more profitable/larger to maintain a diversified portfolio,” he said called. “We initially invested in LUNA because we saw progress in developer adoption, payment usage, and the broader ecosystem being built on Terra.”
Because Pantera ended most of its investment early, it made a significant profit, according to the company. The firm turned $1.7 million into about $170 million, Paul Veradittakit, a partner at Pantera Capital, told The Block.
Meanwhile, other venture capital firms that have backed Terraform are reeling at losses as Terra’s native LUNA token lost almost all of its value due to the UST crash.
The UST algorithmic stablecoin broke sharply from the peg last week to levels below 10 cents, far from its $1 target price. It is still trading at this level. Meanwhile, LUNA is currently trading at a fraction of a cent, up from over $80 earlier this month.
Noting the de-pegging of UST last week, Pantera sold more of its LUNA holdings from the remaining 20% of the investment.
“We got 2/3 of it out at an average price of $25.6,” Krug said. “The rest of it was staked via LUNAX and therefore could not be sold.” LunaX is a liquid staking token from Stader Labs.
Veradittakit had promoted investments in Terra-based decentralized finance platform Anchor, which also lost almost all of its client funds due to the UST collapse.
Anchor’s total locked value (TVL) has fallen from over $16 billion before the UST crash to just over $150 million now, according to data from DeFi Llama.
Veradittakit had called Anchor a “high “fixed rate” savings account.
“20% APY [annual percentage yield]. A fixed-income, low-risk financial instrument with yields as strong as Anchor’s is truly incredible,” Veradittakit said in an April 2021 Medium blog post.
Anchor offered UST depositors 20% APY. Due to the UST crisis, Anchor contributors recently suggested reducing the APY to an average of 4% to make earnings reserves more sustainable.
The UST outage had a domino effect on the Terra ecosystem. In the meantime, Terraform hopes to change the situation. Do Kwon, CEO of Terraform Labs, has promoted a plan to fork Terra to create a new blockchain.
The fork proposal went live around 7:30 am ET on Wednesday. At the time of writing, over 84 million LUNA voted in favor and over 9 million voted against. The vote requires 188 million LUNA to be accepted.
Updated to clarify the timing of Pantera’s LUNA investments.
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