The King is dead! Long live the King!
The blockchain industry continues to be the fastest-growing industry with far-reaching financial implications, so it should come as no surprise that the events of the past 3 months have gone beyond the confines of the industry’s usual echo chamber. With the market cap now precariously sitting at approximately $974m from an all-time high of $3 trillion back in November last year, what started as a whimper has now become a full-blown meltdown.
The industry has always been volatile. Its explosive growth and powerful innovations have invariably become unfettered and fertile playing fields for speculators of all kinds and classes. Through its inherent nature as decentralized and unregulated, cryptocurrency provides an extremely liquid marketplace for speculators without adhering to any set rules and regulations. Over the years, the industry has seen spectacular rises, startling falls, fiendish exploits, and Hail Mary plays. However, they all pale in comparison to the fall of Terra/Luna and the domino effect it’s having on the market.
End of An Era
The blockchain industry has died a hundred deaths before and will likely die a hundred more, but it’s not going away. Blockchain is a precursor technology that may have an impact as far-reaching and long-lasting as the internet itself. The blockchain has the potential to change how the business operates in areas such as property ownership, voting and supply chain management by reducing costs, creating transparency and providing real-time visibility into transactions. Its footprint in the public consciousness and financial market is too entrenched to be eroded by the pandora box of scrutiny and knee-jerk regulations that the Luna crash has rightfully unleashed on the industry.
Or maybe this “too big to fail” mentality is the problem given 3AC’s follow-up act.
As one of Terra’s biggest supporters, 3AC was always going to be affected by Terra’s collapse. Reportedly suffering $200m in losses, 3AC’s loss initially looked like a footnote that could be shrugged off compared to Binance’s $1.6 billion haircut.
Then, it became a chapter.
With a prolific return on investment, a keen eye for identifying trends and developments, and a willingness to throw their support behind projects they backed, 3AC was one of the most respected names in the space. Having established themselves as proven performers in the space, projects were keen to tap into their wealth of experience, market know-how, and network effect. The fact that they were unashamedly perma-bull made them all the more appealing. Who else would you want backing your project if not a backer that not only believed in the long-term hockey stick growth of the market but also could put their money where their mouth was.
Allegedly to the tune of a couple of billions using funds entrusted to it by 3rd parties including the treasuries of some of the projects it backed.
When the numbers start to go up, crypto can be quite exhilarating and intoxicating. Everything turns to gold with little to no effort and it’s extremely hard to not get caught in the narrative and excitement. Being humans and building in the same space, it doesn’t take long for builders to start looking for ways to maximise their treasury’s potential rather than having it sit idea. So when 3AC offered its Treasury-Management-as-a-Service to it portfolio companies, it was too good an offer to pass on for most.
Every Ending is a New Beginning
Hindsight is 20/20 they say and A lot has been written about 3AC’s crisis alongside the market’s new favourite buzzword — contagion. We’re not here to rethread the topic nor ascribe blame to any party, rather, we’re here to offer our support projects in need of such.
To our community, this is not the end of the road for crypto. Every market circle will have its crisis and while the aftermath of the ongoing crisis will continue to be felt for months, the industry will come back strongly from this with greater accountability, transparency, and due diligence.
In the spirit of transparency too, we would like to state that the project treasury has had no exposure to the Terra ecosystem or any other management-as-a-service provider. Tempting as it was, we opted to maintain the treasury in the USDC/USDT accepted for the raise and in accordance with the multi-year runway roadmap, it was allocated for.
Where crypto goes tomorrow is anybody’s guess. But at Pad.fi, it’s just another milestone to tick off as we head towards our next roadmap release.