SBF

Chapter 3The Second Turn: Unstablecoin

When FTX melted down, the prevailing emotion was shock, but when the terra usd stablecoin (ticker symbol: UST) had fallen apart six months prior, it had been schadenfreude.

For those who didn't lose piles of money on it, the sound of terra usd crashing was the perfect music to dance to as they shook their hate of crypto and its culture right on out.

That story had a different villain, a man named Do Kwon, the Korean cofounder of Terraform Labs, the company behind terra usd and its twin coin luna (technically, “terra,” but no one called luna that). But it's a story that's also crucial to FTX and Alameda Research.

What we don't know is this: Were Alameda's debts to FTX already so bad before Terra that both were already doomed? Or could FTX have saved itself by letting Alameda go under with other hedge funds like it in May or June?

So here's what happened: terra usd was an algorithmic stablecoin running on its own blockchain, also called Terra. A stablecoin is a token that is designed to maintain a consistent price in the market. In almost all cases, that price is one US dollar.

Stablecoins are useful, especially for traders. For example, if a trader looks for brief jumps in a certain minor cryptocurrency (known colloquially as “altcoins” or “shitcoins” or “alts”), he or she can keep their cash ready in a stablecoin on an exchange. Then, when opportunity arises, buy an alt quickly and watch its price go up.

Next, when they have made enough, ...