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What Can We Learn From Luna’s Failure? What to Do in the Future?

There are other projects in the digital currency and blockchain industry that have failed, but Luna’s story was shocking because an ecosystem collapsed. With all the ups and downs that Luna and the cryptocurrency ecosystem, in general, have experienced over this time, we are now at the starting point. Certainly, many people were affected by this incident. We must be able to learn from the past and, in addition to compensating for losses, make safer investments and return to profitability. Here are some lessons to be learned from Luna’s failure.

 

1. Big projects also fail

It may be hard to believe that a project like StableQueen will be destroyed in just a few days, but there is no guarantee that a project, no matter how large, will not fail. One of the most important reasons for the success of projects is users’ trust. Just a hack or an attack on a protocol can make people’s confidence in that project diminish and disappear over time.

Strictly speaking, it can be said that projects that have a good position in the market ranking may also suffer from this. Being a little strict is better than unfounded or fanatical optimism; So rely heavily on logic when investing. Take fundamental analysis seriously.

 

2. It’s getting late soon

The speed of what happened to Luna was very high. Within days, Luna fell from the summit to the bottom of the valley. Luna’s price liquidated about $ 150 million in futures in the last few days with a negative record of 80 or 90%. In the first place, not having a bias on the project is one of the things that every trader should pay attention to. Many people warned early in Luna’s price decline; So many people who had this digital currency could have suffered fewer losses.

If you are one of those people who have high hopes and are overly optimistic (we do not use fanatical names), there is another solution for you. You can use trading strategies that limit and manage risk. One of these tools is Stop Loss and Take Profit.

 

3. liquidation and how to prevent it?

Do not keep your capital in these exchanges under any circumstances. With the power of centralized exchanges, they can make any decision. For example, in times of crisis, money changers may not allow users to settle accounts or block assets for a certain period. Apart from these issues, when users feel threatened and rush to the exchanges to withdraw their capital, it is possible that the exchange site does not work well and even becomes inaccessible.

To prevent this from happening, one solution is to keep capital in wallets other than exchange wallets. Another solution is to reuse the loss limit.

 

4. Operation of the project

The mechanism of the Terra network was faulty and this issue was expressed by different experts at different time intervals. Based on previous experience with stable algorithmic coins, it was likely that the UST would suffer the same fate as the rest of the algorithmic stable coins. When you want to invest in a project, in addition to the investors and partners, carefully examine the operation of that project.

 

5. Do not put eggs in a basket

By investing all your capital in one investment position, you increase your investment risk. It is best to have a varied basket. The same is true of stable coins. To be able to manage the risk of our portfolio, it is better to have different assets with specific ratios.

 

6. Make a rational decision and avoid FOMO

When it comes to investing, consider everything rationally and manage your emotions as much as possible. FOMO comes to you when a project is setting a price record and you are worried about missing an opportunity. Some people believe that there are opportunities for investment in the number of people active in the digital currency market.

 

7. Increase your knowledge and information

Many experts had warned about the Terra ecosystem. Following this news, made us think more clearly about the future of Terra. Be careful about the fundamental analysis of a project, be sure to know about this type of analysis, and increase your knowledge in this field as much as possible.

 

The bottom line

The most important lessons we can learn from Luna’s failure are portfolio management, emotion control, Rational decision making, up-to-date knowledge, and follow-up.

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