Delphi Digital, crypto-focused research and investment firm has published a post-mortem on the losses incurred by the collapse of TerraUSD (UST) algorithmic stablecoin last week, concluding that “something like this was always probable.” Delphi wrote late Wednesday on its blog,
“We understood the risks of the algorithmic model upfront and sought to be transparent about them throughout; however, it’s clear we miscalculated the risks. To the vocal critics of Terra’s algorithmic design — you were right and we were wrong.”
Last week, UST de-pegged from the dollar in a disastrous manner, wiping out more than $40 billion in value for investors. Delphi, which competes with The Block for crypto research, was a supporter of the Luna Foundation Guard (LFG), a Singapore-based non-profit with an aim to improve the Terra ecosystem.
LFG’s bitcoin purchases, Delphi digital wrote in an April research bulletin, “gives higher security to protect UST’s peg to the dollar” and “likely reduces the likelihood of it going into a death spiral.” In March, the company announced that customers may pay for their subscriptions with their UST balance and income received from Terra’s Anchor Protocol.
Delphi Digital, one of Terra’s significant operator
Delphi Digital was one of many cryptocurrency exchanges with major exposure to the Terra ecosystem at the time of its demise. For the first time, the group openly assessed the damage in its post.
Delphi Ventures Master Fund purchased an amount of Terra’s native token Luna equal to 0.5 percent of its net asset value in early 2021, according to the company (NAV). Over time, the exposure grew, resulting in “a significant unrealized loss.” Luna and other Terra-native coins accounted for about 13% of Delphi Ventures’ NAV at its peak.
Luna received a $10 million investment from LFG in February as part of a $1 billion token sale. Based on the current price of Luna, Delphi said the investment is “completely wasted,” but added that it sold no Luna during the token’s decline. LFG’s governing council includes Delphi Digital partner José Maria Macedo.
Since February 2021, Delphi’s research arm has produced six Terra-focused publications, none of which were paid for, according to the group’s blog post. According to the report, Terra’s demise had little financial impact on Delphi Research.