On March 14, ‘Sensei Algod’, a pseudonymous degen and investor who’s called Terra a ponzi scheme, made the project’s community an offer it shouldn’t refuse: a cool $1M if the price of LUNA is higher in 12 months.
Do Kwon, the founder of Terraform Labs, accepted the bet and put up the funds.
The wager captures the strong feelings Terra investors have toward its native token and ecosystem. No sooner did the news hit than another trader raised the stakes to $10M, which Do Kwon also accepted.
The meteoric rise of LUNA over the past month has made new millionaires and ruffled feathers across the crypto community. The token is currently the seventh-largest crypto asset with a $34.7B capitalization after rallying 1,460% since the start of July 2021.
But the enormous price gains have come amid increasing doubts about the sustainability of the network’s algorithmic stablecoin, UST, and top protocol, Anchor, which has been the subject of a flurry of moves. Many onlookers are skeptical LUNA’s bullish momentum can continue for the longer term.
Not Do Kwon. “Cool, I’m in,” he replied on March 14 as he accepted Sensei Algod’s challenge. The outcome of the bet will be determined by whether the price of LUNA is higher or lower than $88, according to CoinGecko’s 24-hour price average on March 14, 2023.
The popular crypto analyst “Cobie” also agreed to act as an escrow for the bet and hold the wagers for the year, and shared a wallet address to accept desposits. Etherscan data shows two transfers of 1M USDT being made to the address shortly after it was created, with Cobie tweeting that the address bet appears to have been fully funded.
However, the pseudonymous retired trader “GCR” has raised the stakes, challenging Do Kwon to a $10M wager under the same terms and pledging to donate half of the funds to charity. The Terraform Labs founder obliged, tweeting “Sure, fund @cobie’s wallet and I will match.”
The pair agreed on the same terms as the bet with Sensei Algoid. GCR tweeted that 10M USDC had been transferred to Cobie’s wallet.
The heightened wager caught Cobie off guard. “Just woke up and there’s a 10m deposit in the Luna [b]et escrow account lmao who did this and why.” he tweeted. Cobie also announced he will set up a two-of-three multisig custody account so that the funds can be retrieved in the event he passes away.
Last month, Sensei Algod described the relationship between UST and LUNA as a “Ponzi.” UST’s peg has historically been maintained by allowing 1 UST to be exchanged for $1 worth of LUNA at any time. When UST falls below $1, traders can purchase it on the open market and then swap it for $1 worth of LUNA, pushing the price back up to $1.
Demand for UST is also driven by the roughly 20% fixed APY offered by yield protocol Anchor. Sensei Algod asserts that the yields are “printing out of t[h]in air” and are “unsustainable.”
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“The further [UST] grows, the more pressure there is on Luna,” said Sensei Algod. “What Lunatics are expecting is that demand will infinitely keep exceeding supply, the moment supply exceeds demand people will panic and start mass redeeming UST for LUNA.”
Concerns regarding Anchor have reverberated across the crypto community when it received a $450M injection from the Luna Foundation Guard to sustain its high yields after its own Yield Reserve was on track to be fully depleted in February. Anchor hopes its forthcoming v2 iteration can sustain the yields with protocol revenue from November.
Anchor also represents nearly 51% of Terra’s total value locked (TVL), suggesting that a failure to sustain itself could have dire repercussions for the Terra network.
The Luna Foundation Guard raised $1B via a private LUNA sale in February. The funds were earmarked for a Bitcoin-denominated UST reserve to alleviate selling pressure on LUNA in the event that the stablecoin’s peg fails.