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February 4, 2022

The Bull & Bear Case For LUNA 🤑

GM, This is the Milk Road. We show you 1-2 cool things about crypto, in less than 5 minutes a day.

In Today's Email:

  • 📈 The Bull & Bear Ca

  • 🌐 YC Web3 Startups

  • 🤑 Funding Friday

I Have Good News For You

Congratulations. The world is your oyster

Why I'm Betting on LUNA

I told you that in 2022, I’m going to turn $1m into $10m.

Since then, the market crashed, and I have so far turned $1M into ~$700k.

Hang on, going to go gargle castrol oil.

But hey, your boy has the stones to withstand this bear market. So we hold on.

One of my bets that has actually held up fairly well in this down market is LUNA. I bought $200k worth of Luna at ~$35-40. (today it’s $50)

So today, I want to give you the bull & bear case for LUNA.

———–

Why did I invest in LUNA?

Well, the truth is, I heard about it 3 times, from 3 smart friends. So I went and bought $25k immediately. Then I learned about it, and bought $175k more.

It sounds stupid, but that is honestly, 3 smart friends being excited about the same thing in crypto is a pretty strong signal.

What the heck is LUNA (in 90 seconds):

1/ Crypto currencies are called “currency”, but nobody really uses bitcoin or eth for payments

2/ Why not? They think it’s going to go up. And the IRS taxes it as “property”, not currency. So you’d have to pay taxes on your gains everytime you used it to pay for stuff.

Put simply – Volatility & taxation make it hard for crypto to be a currency today.

3/ That’s why stablecoins were invented. These are cryptocurrencies that are pegged to be worth $1 US Dollar. This price stability makes it useful for payments.

4/ There are many stablecoins, but the most exciting one is UST (known as Terra) and the token that backs it, called Luna. (Terra = earth, Luna = moon).

Did i oversimplify? Yes, I oversimplified. My goal with these breakdowns is to get the idea across, not spend 4 hours in the weeds about the system architecture.

What makes it exciting?

  • Real use case:

    • In Korea, many ecommerce stores accept UST, because their credit card fees are 3% and UST only charges ~1% fee.

    • UST is accepted by ~20+ ecommerce stores, including the 2nd biggest one in Korea (TMO)

  • The Crypto Mullet Strategy

    • Users in Korea don’t need to know the word “blockchain”. They just pay from their phone, and the crypto stuff happens in the background.

    • I call this the crypto mullet strategy. t looks normal in the front, and gets funky in the back.

  • The founders are impressive

    • Daniel Shin – ran a successful tech company, sold it, and then was CEO of the 2nd largest ecommerce company in Korea before starting this. He now runs the payment app that drives UST growth in Korea.

    • Do Kwon – a young, but very smart, and very ambitious guy who is fearless

  • I'll make money just holding it

    • They have a savings protocol called Anchor that gives you 20% yield on your Luna.

  • It has traction

    • It’s the 4th largest stablecoin in the world now (growing fast)

    • Has an $11B market cap and ~$300M of UST transaction volume per day on average right now

    • $9B+ of value is locked into it's smart contracts.

  • The way the token works is:

    • When someone wants UST

    • The system burns some Luna, and creates UST

    • Burning = less supply of luna == price goes up

    • If demand for UST goes down.. The price of Luna goes down too.

So as long as there is demand for UST, the price of luna will go up.

Where will that demand come from?

  • Real world —> people in korea shopping online can pay with UST. They get a slight discount (~5-10% off) if they use it and merchants save ~2% on transaction fees

  • Crypto world → They have a savings app, Anchor, that lets you earn 20% on your stablecoins (imagine if Wells Fargo offered you that on your savings account). A lot of people like the idea of earning a steady 20% on their money, so it has attracted $5.4B in deposits (FWIW, Wells Fargo has $1.9 trillion, as a comparison)

What could go wrong?

Like any new project, a lot of shit. There’s always legal risk, smart contract risk, etc..

If I just said that, that would be “cover your ass” style disclaimer. But do we do cover-your-ass-content on the Milk Road?

*points microphone at the crowd*

*crowd is silent, confused*

*shaan says “Hell no!” into the mic*

So what is the thing that’s stopping me from going all in on Luna?

Well – I went back and watched the earliest videos of the founders talking about it. Like this one (it’s worth a watch). Everything he said was music to my ears.

  • Crypto isn’t being used as currency

  • We need a real use case

  • Ecommerce is a real use case because it helps both sides. Merchants get lower fees. Customers get discounts.

  • They had a traction focus, not just writing technology whitepapers

  • He made fun of the stupid projects in crypto that have no users and multi-billion dollar market caps.

I loved it. Every second of it.

The ecommerce use case was the most exciting bit. They had like 500k users, actually paying for things in the real world with crypto. That was super exciting.

But in the last year, I can’t find any updates about the ecommerce usage data. Is it growing? Is it shrinking? Did they pivot? Why are they only talking about UST usage in DeFi now?

That’s the problem with most crypto traction. It’s crypto being used to buy/speculate on other crypto. So you have to discount it.

Ben mentioned, “just because they aren’t talking about the ecom usage, doesn’t mean its bad”

sounds dicey 🎲🎲 bapa.

If you had a stablecoin that was actually growing in the muggle population…wouldn’t you talk about it?

Do Kwon is a super smart guy. There’s no way he’s forgetting to talk about that.

It would be the most bullish story in all of crypto. Everyone has been waiting for this use case. People actually using crypto as currency, who are not just speculating with crypto about other crypto projects.

So that leads me to think – the ecommerce/payments adoption traction must not be impressive, otherwise they’d be shouting about it from the rooftops.

To me, that’s the number one thing holding me back from going all in. That it seems to be growing for DeFi (using crypto to buy/earn other crypto) instead of the original exciting vision (using it for payments in the real world).

Overall

I’m still bullish, but waiting to see that data before making a super-sized bet.

Luna has:

  • A Strong team

  • Real momentum

  • A clear differentiation against Bitcoin and Ethereum

  • Strong meme game (this is a compliment)

And If Luna hits $1k this year, I’ll even get a Lunatics tattoo like billionaire Mike Novogratz did recently:

Funding Friday

Y Combinator is the world’s #1 startup accelerator.

Companies like Airbnb. Doordash. Coinbase. All went through YC. It’s Harvard for Startups.

Here’s some of the Web3 companies I found in the current batch:

Hapi Finance – making it easy for you to transfer your crypto when you die

NFTScoring – NFT analytics

Decent – Bringing artist royalties on-chain

Finnt – DeFi in your pocket

Oh and outside of YC? $340M of funding was announced this week for crypto companies!

– Shaan "I'm getting a tattoo" Puri and Ben "Stable" Levy

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