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Terra-Luna drop, what happened and why is related to Business management

On May 10, the crypto world was rocked by the collapse of one of the most famous coin stable of the last period Terra-Luna.
But what happened and why?

The attack, which is estimated to have brought a gain of about $1 billion to the attacker, is based on the use of a short position.
But before explaining what a short position is and what happened, I think it is necessary to specify that the attack did not happen to the direct damage the Terra-Luna system, but rather the attacker's main objective was the value of Bitcoin (BTC).

What is a Short position?
A short position is a type of bet that you can place on the stock market. To take a practical example: let’s say that I borrow 100 balls, which at the time of my acquisition cost $1 per ball, thus having 100$.
I bet that the price of the balls will go down. Then I sell my 100 balls and take the $100; the next day, the value of the balls falls to $ 0.80. Then I buy back the 100 balls and return them to the rightful owner, thus earning us 20$.

Simplifying this is what happened with the Terra-Luna system: the attacker opens a short position with 100,000 BTC and forces the value of these, through the Terra-Luna algorithm, to go down. In doing so he can buy again the 100,000 BTC, which now has a much lower value, and keep us a substantial gain.

In this news, there are 2 elements of business management that we faced during the course.
The first problem we observe is from the part of the provider, in particular from the algorithm used to maintain Terra as a stable coin (that is a coin that always has the value of 1 USD); the second we observe him in the part of the user, that unfortunately, after this attack has lost the savings invested in the system.
The first problem is the creation of an algorithm that has not faithfully followed the steps of the problem-solving protocol, going to intervene on the symptom of the problem (The loss of value of Terra) and not directly on the origin (An outside agent who was manipulating the stock market). The algorithm, seeing the price of Terra going down, begins to reinsert liquidity, selling Luna. In doing so, it affects the value of BTC which drops drastically.
However, I do not believe that all the blame lies with the programmers of the algorithm. But the problem is much more at the root of the crypto market, that is, a regulation that protects users from attacks of this kind.

The second problem concerns the omission of the decision-making process by investors. There are two reasons why the investors may have lost everything.
The first reason can be blamed on the company behind the Terra-Luna system because, to keep alive the Anchor algorithm, which manages the stable coin Terra, they had to tempt to leave the cryptocurrency within the system, creating the possibility of creating portfolios with an interest rate of 20%. In doing so, the inexperienced investor, seeing his savings grow in a short time, was little tempted to invest in other coins, investing 100% of their savings in the Terra-Luna system and losing everything with the collapse of the cryptocurrency.
The second reason is the result of a phenomenon called panic selling.
In a few words, when investors, or those for them, saw the value of Terra dropping so dramatically, they started selling their coins massively; by doing so, they have saved some money from the drop and, at the same time, contributed to the decline in the value of Terra, dragging other investors into the abyss together with them.





Depp vs Heard: Where HR and Ethics meet

I chose as my second news the trial that saw Johnny Depp and Amber Heard clash in court. Excluding how the confrontation had a huge media following and how the major broadcasters are riding the wave of success, which would be a perfect topic for the marketing course, I would like to focus on what this process entails at the level of Ethics and Human Resources.

In 2019, Johnny Depp filed a US$50 million lawsuit against Amber Heard following an op-ed written by her in which she claimed to be a victim of domestic violence and sexual assault during her marriage to the American actor. According to Depp, that op-ed would have cost him his participation in many films such as Pirates of the Caribbean 6 and the saga of Fantastic Beasts, thus causing him enormous economic damages. But the main reason behind this case, according to the actor, is the reveal of the truth, and how he was not the abuser, but the abused one.
After a 6-week trial, Depp won and was awarded US$15 million, then reduced to US$10.35 million due the Virginia law.

The question I asked myself during the trial, which was useful to me to complete the task, was: "Should someone’s crimes in their private life interfere with their career?"
I could not find a right or wrong answer. Every time I pause and try to find a solution to the question, billions of possible variables jump to my mind, from the type of profession to the privacy issue that separates working life and private life. I believe I am facing a real ethical doubt.

The temporary answer that I have given myself, but which I am willing to question, is that all this depends on the profession. In the case of the article, it is almost indisputable that an actor accused of domestic and sexual violence is removed from all productions in which he works. His behaviour would be reflected not only in his actions but also in that of the entire film company, risking mass strikes with the risk of creating a hole of millions of dollars in the coffers of the producer company. But can we apply the same criteria to the simple employee of the company who works all day in a cubicle? How much he, too, must pay for the behaviour he has had, and no punishment, in my opinion, can ever be enough to remedy what the victim has suffered; does it affect his workplace? I leave to you the final reflections on ethics is or is not something subjective in continuous evolution?