Dead Fundamentals, Lively Speculation
Written by: David, Deep Tide TechFlow
As of the evening of December 10, you may not have noticed that the contract data for the LUNA token is quite outrageous.
Without any technical upgrades or positive ecological news, the total 24-hour trading volume of LUNA series contracts (including LUNA and LUNA2) across the entire market has approached 1.8 billion USD.
Moreover, LUNA itself has risen by 150% in the past week.
In comparison, the combined trading volume of LUNA and LUNA2 is now nearly ranking in the top ten of the entire market's contract trading volume, second only to HYPE's 1.88 billion USD.
The funding rates for the two are -0.0595% and -0.0789% respectively.
High negative funding rates indicate that the market is not only crowded but also in a state of extreme divergence: a large amount of capital is shorting, while an even larger amount is using this crowding to force a short squeeze.
We all know that LUNA has no fundamentals left. This 1.8 billion USD liquidity is essentially trading on a bet that is about to be revealed:
Tomorrow, at midnight on December 11, the former "king of stablecoins" Do Kwon will face his final sentencing hearing in Court 1305 of the Southern District of New York Federal Court.
The market is betting real money on the prison term of this former crypto mogul.
The sentence can be long or short, speculation will not rest
To understand this 1.8 billion USD in contract trading volume, we need to look at the real progress of this case.
For most people, the name Do Kwon faded from view after the epic collapse in May 2022.
However, this former crypto tycoon was extradited to New York as early as the end of 2024. In August of this year, he officially pleaded guilty in Manhattan Federal Court, admitting to multiple charges including securities fraud.
Tomorrow's hearing is not a debate about "guilty or not guilty," but a final decision on the length of the sentence. According to the latest court documents, there is a significant gap between the prosecution and defense in sentencing recommendations:
The prosecution advocates for 12 years in prison.
The U.S. Attorney's Office has taken a tough stance, citing the billions of dollars in losses caused by the Terra collapse and Do Kwon's fraudulent actions regarding the "false on-chain" claims about the Chai payment application before the collapse.
In the market's view, 12 years represents a complete end. According to the four-year cycle of crypto, that would mean three cycles have nothing to do with Do Kwon.
The defense requests 5 years in prison.
The defense team has played the "sympathy card," emphasizing that Do Kwon has been detained in Montenegro for a long time and has shown a good attitude in pleading guilty and cooperating with the SEC's fine enforcement.
The 7-year gap is actually enough to create a day trading speculation and capital game around the LUNA token.
The normal logic would suggest that if the founder receives a heavy sentence, the LUNA token would definitely move further towards zero. Therefore, the market is filled with short positions, and we see negative funding rates;
But the main capital, or the market makers, do not necessarily need to believe that Do Kwon will actually receive a light sentence of 5 years; they just need to use the uncertainty of this ruling to push prices up and target those overly crowded shorts.
This may also explain why LUNA experienced a surge on the eve of Do Kwon's trial. The market is certainly not celebrating justice but speculating on the ruling itself.
Originally, the crypto market had no hot topics and was overall weak, but tomorrow's hearing has created one of the few local volatilities.
From Victims to Predators
You are awake now; it is 2022.
If we had opened the LUNA holding distribution chart in May 2022, we would have seen a much more tragic scene:
It was filled with retail investors from South Korea who lost their life savings, crypto funds that suffered heavy losses, and speculators who tried to bottom out but were buried. At that time, trading was filled with anger, despair, and irrational self-rescue.
Three years later, the microstructure of the market has undergone a complete overhaul.
The victims of that year have long since cut their losses and exited. Sitting across the table now may be a group of entirely different participants, such as high-frequency quantitative teams, event-driven hedge funds, and speculators who specialize in hunting "junk assets."
For these new players, whether Do Kwon is innocent or whether the Terra ecosystem has a future is not only unimportant but even a form of noise. The only indicator they care about is Event Beta, which measures the sensitivity of asset prices to specific legal news.
In this context, the asset attributes of LUNA have essentially transformed into a derivative ticket centered around legal matters, much like the fluctuations of certain meme coins revolve around the actions of a public figure.
This is an extremely brutal maturity of the crypto market; death or imprisonment can itself be "monetized."
The current LUNA, even many tokens that are just shells, essentially represent a disaster pricing. The main capital is very clear that the fundamentals have gone to zero. But as long as there is divergence and space for long-short games, this "empty shell" is a perfect trading target.
It can even be said that precisely because there is no fundamental anchoring, the price fluctuations of tokens are no longer constrained and are entirely dependent on the release of emotions.
This also echoes the saying that most tokens in the crypto market are actually memes.
Pricing Everything
After the verdict tomorrow, whether Do Kwon hears "5 years" or "12 years," the outcome for LUNA as a trading target may lead to the same conclusion.
After the event concludes, the token will likely become volatile again; not only will bad news kill the market, but certain good news will too.
If it is a heavy sentence, the logic returns to fundamentals, and the price goes to zero; if it is a light sentence, the good news is realized, leading to a "Sell the News" scenario, and profit-taking will recede like a tide.
To be fair, LUNA is actually a great lens for observation.
It reflects a technical narrative of algorithmic stablecoins and reveals the extremely mature and cold-blooded side of this market.
In today's crypto market, even a dead coin and a founder who has already pleaded guilty can be efficiently repackaged into chips on the gambling table as long as there is a hint of news value.
The liquidity efficiency of the crypto market has evolved to its extreme; it can price anything: emotions, bugs, memes… and of course, also includes a person's freedom and a judgment of justice.
In the face of such extreme efficiency, moral judgments seem a bit redundant.
Do Kwon's life may be spent sadly in prison, but the crypto market knows no sadness, only volatility that has yet to be priced.
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