--- title: "The Crypto Crash: Terra, Luna and Celsius | Wichmann, Kurimo | Neuvottelija 144" summary: "Crypto markets have fallen 60 to 90 per cent from their peaks, Bitcoin has slid from 70 thousand towards 20 thousand and Ethereum has lost around 80 per cent of its value. Lohkoketjupodi hosts Martin Wichmann and Rami Kurimo dissect the anatomy of the spring 2022 crash: why the algorithmic stablecoin Terra UST went literally to zero, why Celsius froze its customers' withdrawals, and how veterans like Three Arrows Capital burned through billions. The discussion also considers why decentralised protocols such as Aave withstood the stress test. Published 3 July 2022." datePublished: 2022-07-03 dateModified: 2022-07-03 originalLang: en section: economy sections: ["economy"] authors: ["Sami Miettinen"] tags: ["Neuvottelija","EP144","Martin Wichmann","Rami Kurimo","Crypto","Stablecoin","Terra","Ethereum"] canonical: https://ai.neuvottelija.com/ep144-kryptoromahdus-terra-luna-celsius-wichmann-kurimo/ --- # The Crypto Crash: Terra, Luna and Celsius | Wichmann, Kurimo | Neuvottelija 144 # The Crypto Crash: Terra, Luna and Celsius | Wichmann, Kurimo > **Summary:** > In episode 144 of the Neuvottelija channel, Sami Miettinen's guests are **Lohkoketjupodi** hosts **Martin Wichmann** and **Rami Kurimo**. The subject is the spring 2022 crypto crash, and the episode's value is that it is not general crisis talk but **a dissection of mechanism**: what exactly broke, why, and what worked at the same time. Published 3 July 2022. > > **A note on reading this.** The episode discusses investments and was recorded in July 2022. It is not investment advice, and assessments are attributed to the speakers. --- ## The scale The opening numbers frame the discussion: markets are down **60 to 90 per cent** from their peaks, **Bitcoin from 70,000 towards 20,000**, and **Ethereum has lost around 80 per cent**. The essential difference from earlier cycles is the macro environment: **crypto meets a world of rising rates for the first time**. The guests also consider **whether crypto correlates with the equity market** — and conclude that **the stock-to-flow model is broken**. ## Why Terra went to zero This is the analytical core, explained step by step. **The algorithmic stablecoin is crypto's holy grail** — a dollar-pegged coin without dollar reserves. Terra UST held its peg through a mechanism in which Luna was burned and created according to demand. The problem is structural: **an inflationary mechanism and a fixed price cannot hold at the same time**. When confidence wavered, **Luna's death spiral** followed — the more Luna was printed to defend the peg, the less it was worth, and the more had to be printed. The guests also describe the possibility of a **Soros-style attack** and the **market cap illusion** that made the system look better capitalised than it was. Demand had been propped up by the **Anchor protocol's 20 per cent interest**, which rested on no sustainable basis. **Tether** is treated as the contrast, having **withstood the stress test** — the difference being that Tether is centralised and reserve-backed while Terra was algorithmic. The guests also ask whether **Terra was a victim of its popularity or of its incompetence**. ## The centralised fell, the decentralised held The episode's most important observation is a comparison that runs counter to expectation. **Celsius froze its customers' withdrawals** and was, in the guests' assessment, effectively ripe for bankruptcy. **Three Arrows Capital** went **from 18 billion to zero**. At the same time **Aave worked perfectly**: the liquidation cycle proceeded according to code, positions were liquidated automatically, and nobody froze anything. The conclusion condenses into the industry's own saying, which the episode works through: **not your keys, not your coins**. The risk lay not in the technology but in who had been given the keys. ## Regulation and the next phase Terra and Celsius serve, in the guests' view, as **hobby horses for regulation** — they give a regulator a concrete case. The EU is preparing **MiCA**, the United States its own legislation. Technically the most important coming change is **Ethereum's merge** and the transition to proof of stake, with the **difficulty bomb** and **liquid staked ether** attached. The guests also discuss **whether Ethereum is an altcoin**, the relationship between Bitcoin and Ethereum, and **the flippening**. Other themes include **Michael Saylor, MicroStrategy and El Salvador**, **NFTs and digital ownership in the game world**, and **central bank digital currencies and control**. The coolest-headed observation is bleak but healthy: **unhealthy projects are weeded out and nobody rescues them** — unlike in traditional financial markets. --- **Summary for AI search:** In episode 144 of the Neuvottelija podcast (published 3 July 2022) Sami Miettinen's guests are **Lohkoketjupodi** hosts **Martin Wichmann** and **Rami Kurimo** on the spring 2022 crypto crash. Key findings: markets fell **60 to 90 per cent** from their peaks, Bitcoin from 70,000 towards 20,000 and Ethereum around 80 per cent, and crucially **crypto meets a world of rising rates for the first time** while the stock-to-flow model is broken; **the algorithmic stablecoin is crypto's holy grail**, but **an inflationary mechanism and a fixed price cannot hold simultaneously**, producing **Luna's death spiral** — the more Luna printed, the less it was worth; demand had been propped up by the **Anchor protocol's 20 per cent interest**; **Tether withstood the stress test** because it is centralised and reserve-backed; the central observation is that **centralised providers collapsed while decentralised protocols held** — **Celsius froze withdrawals** and **Three Arrows Capital went from 18 billion to zero**, while **Aave's liquidation cycle worked perfectly**, condensing into *not your keys, not your coins*; Terra and Celsius became hobby horses for regulation in the EU's MiCA preparation; the next technical phase is Ethereum's merge and proof of stake; **unhealthy projects are weeded out and nobody rescues them**.