Was there a way to foresee what actually happened to Celsius, Voyager, 3AC, Terra etc.?

I was wondering if there are some common signs you look at when considering similar platforms? Did you have any indicators that allowed you to foresee what ultimately happened? I was intuitively avoiding these platforms and went for platforms that so far don’t seem to be affected (e.g. Nexo) but cannot really tell why. Considering that the majority in this space is scammy bs makes it even harder to chose the right platforms.

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25 thoughts on “Was there a way to foresee what actually happened to Celsius, Voyager, 3AC, Terra etc.?”

  1. Be wary of any project with an algo stable tied to it. If you invest and the algo stable drops below 0.92 get the fuck out and take the loss if need be.

    Do not put any money in any centralized lending / yield service until they are regulated and audited. I’m personally not putting any money in them even after that. DeFi is the way.

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  2. I’ve been considering writing a post-mortem analysis on one or more of these topics to give people an idea of how to articulate your intuitive guessing.

    The general idea is that the market hit a bull trap, and instead of de-risking, the supercycle narrative was bought into and so leverage was increased (risk-on) rather than decreased.

    To break it down by mentions:

    * Celsius, for a long time, didn’t have in-app swap (exchange) mechanisms, so really what the user was doing was lending all of their assets to Celsius to earn in-kind yield. Very much just rehypothecation of customer assets into money markets like Aave (???) or Oasis (minting DAI).
    * Nexo, on the other hand, is less affected due to cutting yield completely, and having their in-app exchange. One benefit for these institutions having in-app exchanges is the ability to trade against it, especially when hunting liquidation points. Additionally, Nexo still charged interest on 30-day payments. Celsius offered balloon loans which, in some states, was *0% interest* (California a prime example here).
    * Voyager engaged in risk-on lending to firms like Genesis and 3AC. Genesis also handles in-kind yields for Gemini Trust.
    * 3AC made three leveraged bets that nuked their portfolios and ultimately, their debtor’s positions:
    * Terra – backing it when contagion was imminent
    * Lido staked Ether (stETH) – getting boned on the discount
    * Grayscale Bitcoin – getting boned on discount arbitrage lockup
    * Terra is mostly obvious when you consider all of the above; most people didn’t know how it worked and the promise of safety via Anchor was dangerous, especially in a market looking to return down. Some warning signs:
    * Introduction of cross-chain integrations, such as 4pool (Ethereum/Curve), Cosmos, Solana, and Avalanche. Since Anchor allows liquidators to interact directly with unhealthy loans (how Kujira operated), this meant the surface area for liquidation points increased. [Reddit thread suggesting this](https://www.reddit.com/r/terraluna/comments/uh42cq/what_happened_with_anchors_collateral_on_november/)
    * Self-cannibalizing yield on other protocols to sustain Anchor yield. For example, right before collapse, Osmosis had roughly half of its incentives going to the Terra ecosystem: [detailed comment on this](https://www.reddit.com/r/OsmosisLab/comments/uhdmq9/comment/i7cq9pr/?utm_source=share&utm_medium=web2x&context=3)
    * The utter nonsense that was bLUNA collateral, which allowed debtors to exit the system scot-free by:
    * Borrowing against bLUNA at high valuations for UST
    * Swapping bLUNA for LUNA in the bLUNA-LUNA pool (why this existed is beyond me), therefore pushing debt to yield farmers
    * Allowing bLUNA to liquidate at extreme prices, and repeating the process
    * Using UST to withdraw massive amounts of MIM or 4pool participants
    * In short, Anchor sucked

    All of this can be summed up nicely in one phrase: *if you don’t know where the yield is coming from, you are the yield.*

    Every time you audit a protocol or custodian, you always need to ask how they’re earning yield. If Anchor is earning 19.5% for *passivity*, how much do you think active users are making? (The real answer to this was in 4-7 digit percentiles. Yes. That much.)

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  3. One telling sign is an arrogant CEO or principal partner who flexes on Twitter.

    If the boss isn’t famous it’s better.

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  4. Those who avoided centralized projects were unaffected. Deciding between centralized projects should be based on the quality of the group controlling it and their transparency.

    Bad signs include: interest rates far above the market, swarms of social media hornets enraged by any critique of their coin or CeFi service, and founders display unearned arrogance.

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  5. Yes.

    1) UST had essentially the same design as Iron/Titan which had collapsed in similar fashion

    2) 80%+ of UST supply was in Anchor. Doesn’t take a genius to see the only demand is for the (likely unsustainable) yield.

    3) Celsius, Voyager are centralized and opaque. Avoid anything centralized like the plague.

    4) On-chain data showed massive amounts of UST transferred to eth days before the massive targetted sell that started the depeg. That should set off some alarm clocks. Even after that there was decent amount of time to get out before the full depeg.

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  6. Same as usual, don’t trust centralized entities and DYOR for Luna, many people knew how the algorithm worked and tried to warn on reddir

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  7. If it seems too good to be true, it probably is. If you think you’re earning 10+% risk free, I can guarantee you you’re not. Whoever is giving you the 10% is doing something a hell of a lot riskier to earn a premium on the money you’re depositing.

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  8. Yes, by reading reddit (example the Terra bankrun was predicted well before it eventually happened) and knowing that CeFi is just DeFi with a middleman with the same smart contract risks.

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  9. It’s all about liquidity. At some point UST simply did not have enough liquidity to back the 1$ value. Which means that if shit hits the fan someone will not be able to get their money out because there is simply not enough for anyone.

    And shit ALWAYS hits the fan eventually.

    This is about stablecoins, about other tokens it’s all about the solidity of the project, the use case, the devs and the security. But at least there you know to expect volatility so y know

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  10. You could have understood how UST worked and known what scenarios could potentially lead to issues. Like when the market was going bear and the marketcap of LUNA was barely more than that of UST and going lower by the day. If you understood how UST worked you would have understood that bad things could be on the horizon if things continue.

    As for cefi, they’re totally closed boxes. Mystery machines. Unless you worked at the company and in the right department, you wouldn’t have known they were about to implode until they *chose* to let you know or they lock accounts out of the blue one day and it’s like *oh, I guess something went awry*.

    Defi has issues and isn’t perfect but it’s definitely transparent. You can read how a protocol works and understand what the warnings signs of things going left would be. You can look on chain and see who the customers and addresses are.

    Cefi imo should try to be more on-chain. Public addresses that anyone can look at. *If they issue* under collateralized debt, they should try to do so on-chain. Maybe issue an NFT that represents it so interested parties can monitor what’s going on and build tools to calculate it for the public. I think total black box cefi lending/yield is going to be less and less prevalent. People *should* demand more transparency of funds, especially when it’s a blockchain company and blockchain offers all the tools to make this possible.

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  11. If they’re offering you higher than normal returns compared to their original staking yield…. you should question how they generate that yield. If you can’t find the answer or be able to assess the riskiness of the business… just invest what you are willing to lose cause you most likely will and have the rest of your holdings in a cold wallet.

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  12. My personal experience:

    * Not your key not your crypto, so no CEX. If they go down you loose everything.
    * No investing with noname DEFI protocol. For example [Scream.to](https://Scream.to) seemed legit, yet they fucked up hard, probably delebrate. Aave could too fuck up, but it is very unlikely. (just putting my faith here though). Due diligence is not a guarentee that bad things will not happend, just the likelyhood is reduced.
    * Anything that has algo and stable in the name, and wants you to have faith. Don’t have faith. Jump over them. It has happened all to often and all have failed, all were marketed as failproof.
    * Invest only the amount you can afford to loose, it is wild west.

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