May 11, 2022

🥛 Luna Crash Continues

GM. This is the Milk Road, where we produce the hitclips of crypto.

OK let’s dive into today:

Estimated read time: 3 minutes and 15 seconds

  • 🌕 LUNA crashes to $2

  • 🚲 How to survive crypto cycles

  • 🍪 Bite-sized cookies

  • 📈 Chart of the Day


We thought Monday was bad for UST and Luna……Tuesday said, “hold my beer” and took it to another level.

Here’s what happened in the last 24 hours:

  • UST fought its way back up to $0.85 range and then completely collapsed to as low as $0.38

  • Luna went from $32 → $2.20 (as of publishing time)

  • Anchor has seen an additional $6B UST get withdrawn (the bank run continues)

So, what happened this time?

Well, there were a number of factors at play:

1/ People are scared and are still looking to exit their positions on UST and Luna.

2/ Everyone was waiting for the “recovery plan” from Do Kwon which took over 24 hours.

3/ The exchanges that halted UST & Luna trading on Monday, reopened on Tuesday and people were obviously looking to exit

4/ It’s unknown how much gunpowder Luna Foundation Guard has left in Bitcoin reserves, but everyone's guess is: not much

5/ There were rumors earlier in the day that part of their exit plan was a $1B – $1.5B capital injection, but that seems to have fallen apart

What’d Do Kwon say?

We were all waiting for Do Kwon to announce the UST recovery plan….and he basically said the only path forward is to let the chaos continue, in order for UST to start re-pegging.

“There is no way around it”

  • He’s proposing to accelerate the burn rate for UST by 4x. (aka make the pain go by quicker).

  • As UST gets rebuilt, it will move away from an algorithmic stablecoin to a collateralized one (aka something backed by code —> something backed by assets)

He admits that things are gonna get ugly for UST and Luna holders:

Do Kwon ends with: “Terra’s return to form will be a sight to behold. We’re here to stay. And we’re gonna keep making noise.🌕”

And there’s definitely more noise now… news just broke that Do Kwon was previously behind a failed stablecoin project called Basis.

The Milk Road’s take: It’s now looking like the “Fall of Terra” is one of the biggest collapses in crypto history.

Terra went from a $20b market cap stablecoin and $40b market cap L1 network to nearly zero in one week. Brutal.

With capital quickly drying up and trust gone, it’s getting tougher and tougher to see a way out of this.

For those asking, yes this is a punch to our portfolio.

We were one of the millions who believed Terra could make it as a decentralized stablecoin.

But in the end, the risks played out. That’s the thing about risks, they aren’t just something you say for fun, they are real possibilities.

What we saw was a sophisticated player come in with:

  1. Huge bankroll: over $1B of sell pressure

  2. Great timing: they attacked when Terra was moving liquidity, so breaking peg was easier

So we take the L (the loss, and the learning) and carry on.

Investing in crypto is inherently risky. The odds of taking a major L are high. I’ve seen the biggest exchange get hacked (Mt. Gox), smart contract buys draining projects to zero, scammers stealing wallet passwords, and now a peg break of a $20B stablecoin.

If your frame of reference is the stock market – you see crypto wild swings and think “Are these people all drunk? Did the Nasdaq just take a body shot off the S&P 500?”

Because in the stock market, it’s unusual to see such high volatility.

But for me, I come from the startup investing world. That’s my frame of reference. In startups, you will have a portfolio of 30 companies. 25 will fail or break even. 3 will have return ~3X. And 1-2 companies will go up 100X+.

Crypto is similar.

That’s why we have rules limit exposure on high risk/reward bets (Eg Luna was 20% of the portfolio) and go in eyes wide open to risks and OK with the idea that sometimes they will play out.

We’re big boys here. So no crying, over milk that’s lost 92% of its value in 3 days 🙂


If you’re a crypto billionaire, you’ve seen your fair share of crypto winters. And with the Luna collapse, we might be on the verge of another.

So, when we saw that two heavyweights were sharing their take on how to manage through these times, we grabbed the TLDR for ya:

Changpeng Zhao (CEO of Binance), 11th richest man in the world:

If you panic during a dip, you are probably overinvested.

Try to reduce your investment size by 2x or 10x.

You will be in a much better position to control your emotions. Only increase your position when you can handle your emotions.

Fred Ehrsam (Co-Founder for Paradigm and Coinbase)

This blog post was originally sent as a private note to portfolio companies but Fred decided to make it public last year. What a guy.

He shares his learnings over the 3 prior market cycles he’s witnessed (2011, 2013, and 2017).

While it’s impossible to predict the future, past cycles give us some sense of what to be ready for.

They can help us imagine the potential aftermath and serve as a reminder that uncertainty and volatility are expected in crypto. After all, this is technology that’s supposed to disrupt the world as we know it – there are gonna be some hiccups along the way.

Here are some key trends in previous cycles:

They strengthen the ecosystem. Crypto has exited every cycle stronger than it entered. This is true for things like developer activity, academic research, infrastructural maturity, corporate adoption, public awareness, etc. “Zooming out, cycles can be reframed as volatile periods around a relatively consistent adoption curve.”

They push infrastructure to the limit and wash out the weak projects. This is true of companies, crypto-native apps, and the blockchains themselves. Exchanges go offline. Transaction fees rise 10-100x. We’re seeing this live with everything going on over the last few days.

Poor fundamentals and flawed strategies are exposed in downcycles. Many fail to survive.

Prepare yourself for a marathon, not a sprint. So many people get burnt out. Stay healthy and allow yourself to take time to clear your head. Challenging situations become easier to deal with the more you have experienced them. Give yourself the opportunity to build that experience.

Keep the main thing the main thing. Since it feels like everything is working in boom times, it's tempting to want to do and invest in everything. Maintain a high bar for changing or expanding your scope. The same idea is true in a downcycle. The crypto graveyard is filled with the remains of investors who moved away from their core thesis in a downcycle. Stick to what you’re most confident in.

Final words: “Cycles are neither good nor bad; they are natural. Peak euphoria provides the opportunity for the world to dream about the future. Rock-bottom despair forces practicality and clarity. When things are good, they're never as good as they seem; when things are bad, they're never as bad as they seem.

I do know that every past cycle has left crypto stronger than where it started. Times when things feel like they are going well, are the times to build resiliency and set yourself up for success no matter what the future holds. I hope you embrace that opportunity."


Napster was acquired by Algorand blockchain and Hivemind Capital (a crypto VC firm). All the OGs are making a coming back in Web3 – first Limewire, now Napster. Myspace next?

Nouns NFT drop their new collection, Lil Nouns. The cool thing about this is there’s a new NFT that drops every 15 minutes that people can bid on. This is supposed to never end…

El Salvador gives us a sneak peek into what Bitcoin City will look like.

AMC Movie Theaters announce that 35% of all online transactions were made using crypto during Q1.

Coinbase releases their Q1 earnings: they missed their targets for revenue and profit. To make it worse, they saw a $430M loss.

Crypto companies and funds saw some big investments come in: Flow launched a $725M economy fund, companies raised $350M+, SpiCE VC launched a $250M blockchain fund. All in the last day 🤯🤯


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After 4 straight weeks of more selling than buying, we finally see an inflow of $40M into crypto this last week.


Shaan aka “Elon’s chocolate milk” & Ben "2% Milk" Levy

See ya tomorrow!

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None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.