Several cryptocurrency companies have claimed going belly up or facing financial distress in the past couple of months. While some of these have been due to the bearish sentiment and overall decreased crypto trading volume within various exchanges and ecosystems, projects have also been harmed or plunged in value due to several other incidents. One such incident that affected the cryptocurrency industry as a whole recently was the LUNA token crash.
The value of LUNA token of the Terra Luna protocol saw a drop in value of around 99.998% and was responsible for many major losses incurred across the globe by retail investors and major corporations alike. But on the flip side, a certain organization has claimed to have lost funds due to high volatility while short-selling the asset amidst the price drop. Uprise Investment Fund stated that it lost over $20 million in the unlucky trade.
Short selling involves borrowing assets from a brokerage and selling them immediately, hoping to repurchase them at a lower price later. An investor keeps the difference in price if they are successful in shorting assets at the lower price, returning them to the brokerage, and buying them back at the lower price.
Organizations usually create major profits over time due to such trades. Read on to know why Uprise lost funds even when the conditions were in their favour and LUNA was infact, decreasing in value continuously.
What is Uprise Investment Fund?
Headed by ChoongYeob Lee as CEO, Uprise Investment Fund is a Korean organization that specializes in cryptocurrency-related services. Founded in 2018, the firm has offered services in the crypto industry that have seen considerable profits during the bull market.
It is backed by big venture capital firms in the sector like KB Investments and Kakao Ventures. The platform, instead of relying only on manpower and decision-making by fund managers, also has an integrated AI-infused robo advising technology to carry out huge-level crypto trades.
The organization boasts of two main offerings namely Heybit and Iruda, which is a core digital asset finance service and a global ETF investment service respectively.
The Wrong Short by Uprise Investment
The token initially started plunging since the investors were converting leveraging arbitrage opportunities between UST and LUNA. As the news and awareness of these activities started flooding the market, holders of the token started selling or using the same technique to gain more profits or to get out of the project before it collapsed further.
This itself started recording a steady decline in the token price, but as the matter was further publicized through media platforms like Twitter, the token dived further down.
Trading at around $65 on the 9th of May, no one had expected the token to go as low as $0.0000011 within just 3 days. But seeing the downtrend, several organizations and personalities in the space hopped in to take advantage of the situation and make handsome profits. This plan was, however, crushed by the speculated volatility showcased by LUNA.
Timing the Market Gone Wrong
Uprise tried to time the market and shorted the token expecting it to go further below the then price. This, however, wasn’t a successful bet as the token quickly went against their wager by pumping over their liquidation price due to high volatility.
Thus, the funds that were locked in the trade were lost. Uprise said that the assets lost amounted to around $20.4 million and comprised of the customer as well as company funds
The company stated that the lost funds represented up to 99% of the total customer investments managed by the organization. These customers consist of affluent individuals and corporate entities. They added that Uprise will be looking to compensate their customers in some way as the losses were of great value and due to high volatility. A complete report on their digital asset business is expected to be finalized and put out in the coming days.
Luna created a huge impact on the industry with its accident which came as a surprise to many investors. The companies and investors who were most affected by this are still trying to cover up losses while some are still hopeful regarding the potential of the new token that was launched by Terra following the fiasco.
