High Rates Attract Users

Shaan Puri shares his experience with Terra/LUNA's collapse, particularly focusing on their customer acquisition strategy and eventual downfall. He draws parallels between Terra's high-yield savings rate and traditional startup growth tactics, while also reflecting on his personal investment losses.

Key Points:

• Customer Acquisition Strategy:

  • Offered 20% interest rate on stable coin deposits
  • Used $1 billion in investor money to subsidize these high rates
  • Similar to Uber's early strategy of subsidizing rides to gain users
  • Acquired approximately 4 million wallet users through this approach

• Strategy Rationale:

  • High interest rates were intentionally unsustainable
  • Viewed as marketing budget to acquire customers
  • Early users understood rates would eventually decrease
  • Common startup practice: investor money subsidizes early adoption

• Personal Investment Experience:

  • Initially invested $25K, then additional $200K
  • Bought at ~$35 average price
  • Value peaked at around $750K (3x return)
  • Lost entire investment when LUNA crashed to near zero

• Investment Philosophy:

  • Acknowledges risks were clearly documented beforehand
  • Maintains 15% maximum allocation rule for any single project
  • Views losses as motivation to focus on earning through work
  • Emphasizes importance of understanding and accepting potential risks

• Market Dynamics:

  • Project worked while demand increased
  • Collapsed when large-scale selling created "death spiral"
  • Total market value loss of ~$48 billion
  • Stable coin depegged from $1 to cents