Reading pen farming | UST/LUNA death spiral incident, reflection after the end

Cryptocurrency researcher The DeFi Edge tweeted on May 13, 2022 (see the original link for details) his review of the LUNA crash, as well as lessons learned from the event. The Chinese translation can be found on the Internet, and some citizens have shared it in the Matters community (see related works at the end of the article).

This article is only a brief excerpt of the " Top Ten Lessons ", and at the same time, it has been classified and curated (rearranged), and some small comments have been added to help everyone absorb and understand. Without further ado, let's get started!

■ Original subscript excerpt

The original text is first excerpted, which is the advice given to readers by The DeFi Edge, in the following order:

My Lessons From the Terra Luna Collapse:
① Avoid the Cult of Personalities.
② Risk Management.
③ Ecosystem Blindspot.
④ What's a Blue Chip?
⑤ Don't Catch a Falling Knife.
⑥ Never Use Leverage.
⑦ Stablecoin Risks.
⑧ Doxxed Founder Risks.
⑨ Too Big to Fail Bias.
⑩ Haha, should've been a BTC/ETH Maxi.

Next, I condense them into four categories, and keep the numbers for easy comparison.

■ Banded into four categories

1. Don't do it

① Don’t be overly personal ⑤ Don’t take the knife ⑥ Don’t use the lever

The golden rule of stock investment in the physical world can be applied to the "currency circle" without any sense of violation. Seeing ⑥ reminds me of the grandfather Warren Edward Buffett said a thousand and one times "Don't borrow money to buy stocks".

Looking back at ⑤ ⑥ is a kind of execution surface of "water can carry a boat, and it can also capsize", probably because the water is very deep , so most people should not touch it. But if you clearly know "what you are doing" and have your own set of judgments (not blind obedience) , for example, if you intend to hedge the spot position, then make an inverse contract - open the leverage - and feel OK.

＊

2. Don’t just care about “your” asset allocation

② Risk control (individual)
③ Ecosystem blind spot (project party)

The DeFi Edge says he has a rule: no token (token) exceeds 15% of my portfolio.

Earlier, I wrote about how many cryptocurrencies do you have in your asset allocation ratio . The digital asset holdings I set for myself are about 7-10% of the total assets, and I plan to HODL it for a long time. How much of this ratio should be taken is secondary, the key is to draw a dividing line that can "sleep soundly" , and face those who wash up and wash down, but still be calm.

After talking about "individuals", The DeFi Edge also pointed out that the "project side"'s asset allocation is overly exposed (dependent on) the Terra ecosystem.

The warning from this is that the allocation is not only about diversification, but also to ensure that the correlation (co-ordination) between assets is low . I think of the analogy of the battle of Chibi burning the chain ship, and we have to break that chain (as much as possible).

Not only look at "your" asset allocation, but also care about "asset's" asset allocation.

＊

3. Big brother and second brother are right

④ What are blue chips?
⑩ Bitcoin, Ethereum first?

After this incident, The DeFi Edge believes that a currency must "stand the test of time", specifically, it must survive more than two cycles and be in an upward trend to become a blue-chip stock.

The only two blue chips at the moment are Bitcoin/Ethereum.

Since it is a blue-chip stock, its potential should not be viewed with a "growth stock" mentality. The DeFi Edge prefers to think of Bitcoin/Ethereum as a store of value rather than profit maximization , depending on your investment style.

＊

4. Killer whales are watching!

⑦ Stablecoins also have risks ⑧ Non-anonymous founders also have risks

From the perspective of conspiracy theory, those "snipers" who are not happy to see the success of decentralized currencies may still continue to attack other currencies if they seize the opportunity in the future.

The DeFi Edge said that he had to spread his holdings, and the investment limit of each stablecoin was set at 5% to prevent problems.

The ⑧ point is really like an election. All kinds of dark histories of the candidates have been dug up in the past, and they even choose to “snipe” the opponent at a specific time.

Maybe it's just fantasy, but suppose there's a giant whale on the market -- and it's a killer whale -- staring at you. I used to put eggs (stable coins) in different baskets (wallets), but now I learn to pick more eggs of different varieties .

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