We lost >2 million SGD in the Collapse of Terra LUNA & Good Bye

After the "Great Depeg" of UST and the collapse of Terra LUNA, we received lots of messages, emails and comments. Usually, I would try to reply to all of them but I really didn't have the mood to do anything then. Now that both of us are sort of in the final stage of grief (acceptance), I have decided to document what happened and some of our very painful lessons so that hopefully, it wouldn't ever happen to any of our readers.

What's left of our crypto portfolio

At its peak (Portfolio - March 2022), we had a crypto portfolio worth 2.4m SGD with 597k SGD debt from Anchor Borrow and ~100k SGD worth of NFTs. Not forgetting, I had a crypto business with 2 other friends that was built on Terra and we had a bunch of aUST and 5 digits LUNA before the depeg happened. All that is left now is around 28k SGD. A loss of >2 million SGD.

The past week was probably one of the longest and toughest weeks for us. We cried multiple times whenever we think of the amount we lost and the chance/opportunity to give Baby Ong a better life. We had grand plans - buying a property that is near good schools, decoupling and buying a second property for CZM to generate more passive income. Everything vanished just like that. I blame myself for being too greedy and overleveraging while CZM blames herself for not holding me back more which definitely wasn't her fault. The fault is all mine because she wouldn't have been able to stop me. After losing her Anchor passive income, she's feeling extremely insecure and even wants to return to the workforce although I kept reassuring her that we will be fine (estimated 6-7k SGD passive income from stocks). 

For those that are still grieving, do take a look at this comic by The Woke Salaryman (CZM cried while reading this). It wouldn't cheer you up but will help to put things in perspective. No matter what has happened, life goes on. Always remember that money/wealth is merely just one aspect of life and there are more important things in life such as health, family and friends.

Long story short, LUNA price was falling and I had to avoid liquidation by repaying the loan. So I kept borrowing/taking the UST from CZM's Anchor retirement fund to repay my loan. Eventually, I emptied her account but could not fully repay the loan. In the end, we ran out of funds and there was nothing else I could do besides watching everything get liquidated. We were devastated at that point in time but I was still somewhat hopeful that the peg will be regained and consoled myself that we still have about 3-4k LUNA safely staked. Before I knew it, LUNA went into hyperinflationary mode rendering all existing LUNA worthless. I never knew this could happen and was under the impression that there is a cap of 1 billion LUNA. There are 6.9 trillion LUNA now -.- 

Lessons

1. Always take profits. I hardly thought of taking profits because I had so much conviction that UST will eventually become the top stablecoin. Why should I take profit now when LUNA is going to be a few hundred dollars by end of the year? After all, those that made huge profits are those that held on for many years right (e.g. Google, Apple, Amazon, BTC, ETH, etc.)? I am just glad that we managed to walk away with some profits at the end of the day.

2. Diversify. As of last month, we had 53% of our net worth in crypto or specifically in 1 coin and we just lost almost all of it. Had I diversified some of them to other coins or off-ramp it, we wouldn't have lost so much.

3. Do not overleverage and ensure that you have the sufficient fund to repay them when necessary. I did not have enough UST to repay my Anchor borrow debt and ended up liquidated.

4. Do not borrow fiat to invest in crypto. At one point in time, I was borrowing 30k USD from SCB and putting that money into Anchor to earn the difference. Eventually, I decided that it is too risky and reversed/repaid everything. I am so glad that I am not in any debt because I lost money in crypto.

5. Algorithmic stablecoin just isn't going to work. Interestingly, this was what I had believed in before I discovered UST/LUNA. You can see my preference for USDC/GUSD in my earlier crypto articles. Eventually, I was convinced that UST will work because the algorithmic stablecoin is built into a network instead of just a dapp. There's so much utility for LUNA and an excellent L1 instead of just a farm and dump coin (e.g. TITAN). If this has failed so miserably, nothing probably will ever work...

I honestly never thought the death spiral could actually happen. Although I often said that I am simply blogging about what we are doing and asked people to do their own research before investing, if you read our blog and it had influenced your decisions, I’m really sorry. At this point in time, I have sort of accepted the loss but I can't get rid of the guilt that I have been feeling for others. I had so much faith in it that I recommended it to friends and families and they are now all hurt financially. We tried to compensate our siblings' losses but none of them took it :(

~US$300 of gas fee to receive bETH

Am I going to stay away from DeFi after this? Probably not, I do believe in its potential but I will probably not put in fresh funds for the time being. Highly doubt I will ever have this kind of conviction anymore. I have tried Ethereum, BSC, Polygon, Fantom, Avalanche, Harmony, Cosmos (Osmosis, Juno and Secret) and Thorchain but none of them impressed me like Terra did. Ethereum is the worst with ridiculous gas fees for simple transactions (yes, the gwei was high but it just isn't intuitive/user friendly. I should be able to transact at any time at my convenience and pay roughly the same fees) while the rest of the EVM chains are full of forked projects with more scams than legitimate projects. Terra did not have any of those issues and I would argue probably the closest in bringing real-world use cases/adoption with apps/teams like Alice, Kado, etc. Having said that, it seems ETH is the only truly deflationary coin out there and I will be keeping whatever that is remaining. Going forward, we will possibly just accumulate the "blue chip" BTC and ETH as the bulk of our crypto portfolio.

Lastly, I have been wanting to take a break from blogging for a while but I continued because once in a while I get encouraging messages/emails telling me how we have inspired them to start their investing journey early but I guess this is it. Not sure how long the break will be, could even be indefinitely. Besides, you probably shouldn't read/learn from someone that has lost so much money going forward. lol. Take care everyone and till next time or not :'(

P.S. Our blog ended up in a police report and we were quite amused by it. Honestly, whoever that reported it should probably spend more time and effort looking for a job and not waste the police resources.

DeFi - Terra Pylon Protocol Lossless Investments

I have blogged about Anchor Protocol which is a savings account giving ~20% interest and Mirror Protocol where one can implement Delta Neutral strategies to earn ~30-40%. 

Today, I am going to share another extremely innovative product/application on Terra - Pylon Protocol where one can make lossless investments (capital guaranteed) with yield/return >100%. Yes, you read that right. The only tradeoff is the vesting period which I will show/elaborate on further. You can probably get a rough idea of how it works from the above screenshot and this is only possible in Terra due to Anchor Protocol. Anyway, Pylon aims to do a lot more but let's just focus on Pylon Gateway for this article.

Pylon Gateway is a token launchpad for Terra projects. In traditional finance terms, it is a platform for companies to IPO/raise capital and issue shares. Within Gateway, there are 2 products:

1. Pylon Swap

2. Pylon Pool (lossless investments)

Why is Pylon Swap cool? Those that have been in crypto for a bit/while will know that there isn't any fair token launch no matter whatever new project/application claim their launch to be fair. This is a known issue/feature due to how the liquidity pool works. Shall not go into the details but basically, when a new token is launched, bots will always be the first to buy/drain the majority of the token's liquidity resulting in the price of the token shooting up. Typical users who use the UI will never be as fast as the bots, hence will be buying at a much higher price. In another word, users can almost never buy newly launch tokens at their launch price. Pylon Swap solves this problem by providing a platform where one can "swap" tokens at a fixed launch price which is unheard of in my short crypto journey. By getting tokens at launch price, it is almost guaranteed that one will be making money.

An example - I swapped US$1,500 for 150,000 Psi tokens at a fixed swap rate of US$0.01 on 5th Oct. 25% of them will be unlocked on 11th Oct (DEX listing = liquidity pool) and a 3 month vesting period for the remaining 75%.

Look at the long green candle on the 1st day of listing. The launch price is supposed to be US$0.01, it went to a high of US$0.161 (1,610% return) and the current price is US$0.121 (1,210% return). Using the current price, my initial investment of US$1,500 is worth US$18,150 :)

So far, there has only been 3 Pylon Swap and we can take a look at the return:

1. MINE swap price US$0.01 vs current price US$0.167 (1,670%)

2. Nexus swap price US$0.01 vs current price US$0.121 (1,210%)

3. Valkyrie swap price US$0.10 vs current price US$2.329 (2,329%)

Having said that, it looks like easy "guaranteed" money but swapping has become pretty competitive as well and unfortunately, I failed to swap for Valkyrie as it was gone in 16 seconds. Yes, due to bots. On the bright side, one will not be buying at a high price due to low liquidity and as a result, lose money. After the Valkyrie swap incident, Pylon is aware of those bot activities and will be making a few changes to future launches to make it fairer/ideally bots free which I am looking forward to.

Next, let's take a look at the Pylon Pools which are lossless investments (capital guaranteed). For each project launch, there will be 3 pools with different vesting periods/returns (the longer you locked your deposit, the higher the APR/return):

- Pool 1: 18 months, rewards claimable after 9 months

- Pool 2: 12 months, rewards claimable after 6 months

- Pool 3: 6 months, rewards claimable after 3 months

Let me explain why is it lossless/capital guaranteed. When one makes a deposit to any of the pools, the deposit will be routed/deposited into Anchor Protocol which gives ~20% interest. The interest from Anchor will be used to swap/exchange for the respective token. At the end of the vesting period, one will be able to withdraw the initial deposit, making it lossless/capital guaranteed + whatever tokens that were issued/awarded based on the size of the pool. The higher the total deposit, the lesser the number of tokens one will get which is why the APR gets lower eventually. You can take a look at this article which goes into more details - Pylon Pools – how much are you paying for the tokens?

Similarly, let's take a look at an example. The above is a screenshot back in August when Loop Finance decided to offer Pylon Pools before listing their token on a DEX (technically the token has no price/value because it is not traded yet). Let's just assume the swap price per LOOP token is US$0.035 based on the article above. When it went live/listed on a DEX, the price of each LOOP token was around US$1 and the current price is US$0.887.

With the new price, the APR of the pool shot up. If you are still following, this is essentially an ultra high interest fixed deposit equivalent because it is lossless/capital guaranteed with vesting periods. Based on the 5 launches on Pylon so far, no one has/can actually make a loss which is just mindblowing. In my opinion, this is probably one of the safest crypto dapp where it is almost impossible for one to lose money (probably only due to rug, smart contract bug) but still offer the opportunity for unlimited gains. Anchor would be the safer (insurance coverage) but the potential upside is just ~20%.

~553% for an 18 month fixed deposit. Anyone? lol.

Screenshot taken from MoneySmart

Oh. Not safe, you prefer fixed deposits from banks. Sure sure. We all have different risk appetites right :)

Anyway, I have blogged about different ways to leverage crypto to build wealth for people with different risk appetites:

The safer approach using stablecoins

- Earning High Interest Using BlockFi and Celsius Network

- Earning High Interest Using BlockFi and Celsius Network Part 2

- Earning High Interest Using BlockFi and Celsius Network Finale

Risky approach but more hassle-free

- CakeDeFi - The Easy Way to DeFi

- CakeDeFi Freezer + Tracking in StocksCafe

- CakeDeFi - New Plan/Strategy

Highest risk and you are on your own

- DeFi apps on Binance Smart Chain (BSC) such as PancakeSwap and PancakeBunny

- DeFIRE with DeFi

- DeFi - Aave, QuickSwap and Adamant on Polygon (Matic Network)

- DeFi - Farming MATIC using Aave + Curve

- DeFi - Risks and Dangers (I Lost 97% Overnight)

- DeFi - Harmony ONE and Fantom

- DeFi - Terra (LUNA) & Anchor Protocol (20% Interest)

- DeFi - Terra Mirror Protocol Delta Neutral Strategies

- DeFi - Terra Pylon Protocol Lossless Investments

If you are interested in the platform I am using, do sign up using our referral links for some bonus :)
BlockFi: Deposits US$100 or more into your BlockFi Interest Account (BIA), you will earn US$10 in BTC and we will earn US$10 in BTC too.

Celsius Network: Earn US$50 in BTC with your first transfer of US$400 or more and we will earn US$50 in BTC too.

CakeDeFi - Deposits US$50 or more into your CakeDeFi account, you will earn US$30 in DFI and we will earn US$10 in DFI too.

Gemini: We will both receive US$10 of bitcoin after you buy or sell US$100.

On a side note, Futu's moomoo app sign-up promotion is slightly different for this month (from SGD 200 stock cash bundle to iPhone and AAPL shares. Do read the T&C here for more information). If you have yet to open an account, you can do so using our referral link :)

Do like any of the following for the latest update/post!
1. FB Page - KPO and CZM
2. Twitter - KPO and CZM
3. Click here to subscribe using email :)
4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right --> Unfortunately, you can't see it on mobile.)

DeFi - Terra Mirror Protocol Delta-Neutral Strategies

I was telling my friends/"business partners" about Terra which I blogged here - DeFi - Terra (LUNA) & Anchor Protocol (20% Interest) and they got interested in Mirror Protocol and the delta-neutral strategies it offers despite the risk of liquidation. Before I knew it, I was convinced by them that it is actually relatively safe. lol. I guessed I got traumatized by my previous experience when my leveraged CAKE farm got liquidated in Alpaca Finance (BSC) which I mentioned here. 

The main difference for Mirror is that the underlying assets are mostly mirrored stocks called mAssets compared to various crypto coins in Alpaca. It is less likely to be liquidated in Mirror because stocks do not swing as much. Let's take a look at a few examples:

- Apple Best Day - 9.3%
- Silver ETF Best Day - 10%

Basically, if I were to open a short position in Mirror at a 200% collateral ratio (liquidation happens at 150%), the underlying stock will have to increase by 33.33% before I get liquidated. It is highly unlikely for stocks especially those with the highest market capitalization to increase by >30% overnight which was my initial concern - getting liquidated while I am sleeping. I have opened a few positions for a few weeks and it looks pretty "stable" (no risk of liquidation). With the main risk out of the picture, let me share more about the strategy.

Delta-neutral simply means you earn/profit regardless if the underlying asset increases/decreases in price by owning and shorting the asset at the same time. This can be executed in 3 different ways in Mirror:

1. Short farm the mAsset, buy the equivalent number of mAsset that was shorted and hold (easiest to execute but typically the lowest yield as short farm yield fluctuates a lot)

2. Short farm the mAsset, buy the equivalent number of mAsset that was shorted, provide liquidity with an equivalent amount of UST (LP) to long farm (highest yield with some exposure to impermanent loss)

3. Borrow the mAsset, provide liquidity with an equivalent amount of UST (LP) to long farm (exposure to impermanent loss)

Let's take a look at an example of strategies 1 and 2 using mAAPL with an initial capital of 10k UST.

0.15 UST to open this short position

1. I provide $5,000 UST worth of collateral in aUST (which is an interest bearing asset earning 20%. One can get aUST by depositing UST into Anchor) to borrow the mAAPL shares to short. The money from shorting will be unlocked after 2 weeks.

1.52 UST to buy the mAAPL shares

2. Immediately open another position by buying the equivalent number of mAAPL shares which I shorted above.

At this point in time, my position in mAAPL is delta-neutral and I will be earning a 21.21% yield on my short farm of ~$2.5k UST as well as 20% on my $5k UST collateral no matter if the price of AAPL goes up or down. This is strategy 1. 

1.62 UST to provide liquidity to long farm

3. Provide liquidity with an equivalent amount of UST (mAAPL-UST LP) to long farm

With that, my position in mAAPL is still delta-neutral and I will be earning a 21.21% yield on my short farm of ~$2.5k UST, 33.53% on my $5k UST worth of LP on the long farm as well as 20% on my $5k UST collateral. This is strategy 2.

As usual, I have created a spreadsheet if you want to check it out further. There is another spreadsheet made by some CEO that is actually incorrect where it is calculated/instructing one to pledge collateral to both short and borrow the mAsset. If you truly understand it, you will know that's not a delta-neutral position at all. lol.

After 2 weeks, you will be able to claim the money from shorting the mAsset which lowers the capital to just 7.5k UST to farm in Mirror.

Meanwhile, the collaterals are growing at 20% (you can compare with the above screenshot when I first opened the short position by pledging the aUST) which also lowers the risk of liquidation.

The world of crypto is just mind-blowing. With the above delta-neutral strategies, I am getting 30-50% yield with minimum risk (liquidation). Where can we find this in the world of traditional finance?

On a side note, I have moved most of my crypto in BSC, Polygon and Fantom over to Terra. The plan is to move everything to Terra in the next few weeks/months with the majority of our funds invested into LUNA. Oddly, our crypto portfolio is very concentrated and not diversified at all. lol. Stay tuned to our next monthly update for a more detailed breakdown :)

To the moon!

Anyway, I have blogged about different ways to leverage crypto to build wealth for people with different risk appetites:

The safer approach using stablecoins

- Earning High Interest Using BlockFi and Celsius Network

- Earning High Interest Using BlockFi and Celsius Network Part 2

- Earning High Interest Using BlockFi and Celsius Network Finale

Risky approach but more hassle-free

- CakeDeFi - The Easy Way to DeFi

- CakeDeFi Freezer + Tracking in StocksCafe

- CakeDeFi - New Plan/Strategy

Highest risk and you are on your own

- DeFi apps on Binance Smart Chain (BSC) such as PancakeSwap and PancakeBunny

- DeFIRE with DeFi

- DeFi - Aave, QuickSwap and Adamant on Polygon (Matic Network)

- DeFi - Farming MATIC using Aave + Curve

- DeFi - Risks and Dangers (I Lost 97% Overnight)

- DeFi - Harmony ONE and Fantom

- DeFi - Terra (LUNA) & Anchor Protocol (20% Interest)

- DeFi - Terra Mirror Protocol Delta Neutral Strategies

If you are interested in the platform I am using, do sign up using our referral links for some bonus :)
BlockFi: Deposits US$100 or more into your BlockFi Interest Account (BIA), you will earn US$10 in BTC and we will earn US$10 in BTC too.

Celsius Network: Earn US$40 in BTC with your first transfer of US$400 or more and we will earn US$40 in BTC too.

CakeDeFi - Deposits US$50 or more into your CakeDeFi account, you will earn US$30 in DFI and we will earn US$10 in DFI too.

Gemini: We will both receive US$10 of bitcoin after you buy or sell US$100.

On a side note, Futu's moomoo app sign-up promotion is now slightly different (Pfizer and Haidilao shares are given with deposit and 3 trades each on US and HK markets. T&C here) and has been extended to 19:59 hrs SGT, 31st August 2021! As part of the collaboration, I will be giving away 5 moomoo 'neck-fix and chill' pillow (not for sale but can be redeemed in the app) to 5 randomly chosen readers who signed up through our referral link for this month! More information can be found here - Futu's moomoo August Campaign + Merchandise Giveaway!

Do like any of the following for the latest update/post!
1. FB Page - KPO and CZM
2. Twitter - KPO and CZM
3. Click here to subscribe using email :)
4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right --> Unfortunately, you can't see it on mobile.)

DeFi - Terra (LUNA & UST) & Anchor Protocol (20% Interest)

I have blogged about various networks/blockchains (e.g. Ethereum, BSC, Polygon, etc.) and Terra is another network and for simplicity, LUNA is the main/native token like how MATIC is for Polygon. Having said that, LUNA has another utility besides being the average Proof-of-Stake token. It can be burned to mint UST which is an algorithmic stablecoin (1 UST = US$1 although it is not backed by anything).

Anchor Protocol - A picture is worth a thousand words

I can continue to explain but The Babylonians has already written multiple articles in great detail and I do not believe I can do a better job. So if you are interested in finding out more, do check these out:

- What is Terra (LUNA)?

- What is Anchor Protocol (ANC)?

- The Babylonians Youtube Channel

I knew about Terra and Anchor Protocol but dismissed it because the Aave + Curve strategy on Polygon which I blogged about previously gave a much higher yield (30-40%) and I was not comfortable with the idea of UST being an algorithmic stablecoins. I started exploring other alternatives when the yield dropped drastically at Aave and Curve. At one point in time, I was planning to move my Curve deposit in Polygon to Fantom for higher yield but did not follow through (fortunately!) because there wasn't sufficient liquidity for me to bridge over.

When I came across the possibility of doing delta-neutral farming on Mirror Protocol, I looked more in-depth at Terra and UST and I was sold! Delta-neutral simply means you earn/profit regardless if the underlying asset increases/decreases in price by owning and shorting the asset at the same time. Anyway, it looks/sounds like it is risk-free on the surface, but I decided not to implement/farm due to a huge risk of liquidation. If you are interested in how it can be done, you can refer to these resources:

- Terra Bites Tutorial: Three 40+% APR Delta Neutral Mirror Protocol Plays—Win Whether Market Up or Down!

- Mirror, Mirror on the Wall, Who’s the Greediest of Them All

Anyway, after trying out DeFi across different networks for a few months, yield farming becomes repetitive/boring and there are a lot of clones/copycat/scam farms. At the start, it was exciting chasing those ridiculous high yields but based on most of my experiences, the price of the farming token always start off high and drops gradually, the yield will drop and people will start dumping it and this vicious cycle will result in huge capital loss. Despite the high yield, it is actually quite hard to recover from the capital loss. 

On the other hand, Terra is really unique in the sense that everything is built around its stablecoin (UST) and that means it will increase the demand for UST which will increase the price of LUNA in the long term. Being an algorithmic stablecoin, the biggest risk is the death spiral/losing peg similar to TITAN but because it has such a high utility and is even cross chains/networks, it will always be arbitrage to maintain its peg. One can even buy insurance and get compensated if UST loses peg. Anyway, you can read this for more information - Why UST Is A Superior Stablecoin.

Other insightful articles which I came across:

- A Visual Explanation of Algorithmic Stablecoins

- Stablecoins — Defining the Terra Algorithmic Design

- Twitter thread by terra_money

Our Terra Portfolio

Besides depositing UST to Anchor Protocol to earn ~20% interest, staking LUNA with the validators allow us to collect some fees/rewards but the most exciting part is the airdrops that will be given to LUNA stakers for both current and future projects.

In my opinion, buying and owning LUNA now is like buying and owning Ethereum back in 2016. Alright, maybe it is unlikely to become as big as Ethereum so how about buying and owning BNB back in 2019. 

With that, I will be moving most of my money in crypto into Terra (already did). I am planning to split the US$40k leverage into US$30k in UST earning 20% and US$10k in LUNA with monthly DCA and interest from the UST to purchase more LUNA.

The more I read and understand it, the more convinced I become. To the moon! 

Anyway, I have blogged about different ways to leverage crypto to build wealth for people with different risk appetites:

The safer approach using stablecoins

- Earning High Interest Using BlockFi and Celsius Network

- Earning High Interest Using BlockFi and Celsius Network Part 2

- Earning High Interest Using BlockFi and Celsius Network Finale

Risky approach but more hassle-free

- CakeDeFi - The Easy Way to DeFi

- CakeDeFi Freezer + Tracking in StocksCafe

- CakeDeFi - New Plan/Strategy

Highest risk and you are on your own

- DeFi apps on Binance Smart Chain (BSC) such as PancakeSwap and PancakeBunny

- DeFIRE with DeFi

- DeFi - Aave, QuickSwap and Adamant on Polygon (Matic Network)

- DeFi - Farming MATIC using Aave + Curve

- DeFi - Risks and Dangers (I Lost 97% Overnight)

- DeFi - Harmony ONE and Fantom

- DeFi - Terra (LUNA) & Anchor Protocol (20% Interest)

If you are interested in the platform I am using, do sign up using our referral links for some bonus :)
BlockFi: Deposits US$100 or more into your BlockFi Interest Account (BIA), you will earn US$10 in BTC and we will earn US$10 in BTC too.

Celsius Network: Earn US$40 in BTC with your first transfer of US$400 or more and we will earn US$40 in BTC too.

CakeDeFi - Deposits US$50 or more into your CakeDeFi account, you will earn US$30 in DFI and we will earn US$10 in DFI too.

Gemini: We will both receive US$10 of bitcoin after you buy or sell US$100.

On a side note, Futu's moomoo app has made their sign-up bonus even more attractive (one free Apple share + one free Nio share with 5 trades + other benefits) and it has been extended to 2nd August 2021! Take a look at the latest benefits here.

Do like any of the following for the latest update/post!
1. FB Page - KPO and CZM
2. Twitter - KPO and CZM
3. Click here to subscribe using email :)
4. Instagram - KPO_and_CZM (Did you see those delicious food photos to the right --> Unfortunately, you can't see it on mobile.)