How did the Do Kwon trial trigger an 1.8 billion USD speculative frenzy?

Author: David, TechFlow

Original Title: On the Eve of Do Kwon's Sentencing, 1.8 Billion USD Is Betting on His Prison Term

As of the evening of December 10, you may not have noticed that the contract data for the LUNA token is extremely unusual.

Without any technical upgrades or positive ecosystem news, the combined 24-hour trading volume of LUNA series contracts (including LUNA and LUNA2) across the entire market has approached 1.8 billion USD.

And LUNA itself has risen by 150% in the past week.

For comparison, the combined trading volume of LUNA and LUNA2 now ranks roughly 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 mean 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 force is using this crowding to squeeze the shorts.

We all know that LUNA has no fundamentals left. This 1.8 billion USD liquidity is actually a bet about to be revealed:

Tomorrow, at 24:00 on December 11, the former "Stablecoin King" Do Kwon will face his final sentencing hearing in Courtroom 1305 of the U.S. District Court for the Southern District of New York.

The market is using real money to bet on the prison term of this former crypto mogul.

The Sentence Could Be Long or Short, Speculation Never Rests

To understand this 1.8 billion USD contract trading volume, you need to look at the real progress of this case.

For most people, the name Do Kwon faded from view after the epic crash in 2022.

But in fact, this former crypto tycoon was extradited to New York, USA, as early as the end of 2024. And in August this year, he formally pleaded guilty in Manhattan federal court, admitting to multiple charges including securities fraud.

Tomorrow's hearing is not a debate about "guilt or innocence," but the final decision on the length of the sentence. According to the latest court documents, there is a huge gap between the prosecution and defense's sentencing recommendations:

The prosecution is seeking 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 "fake on-chain" Chai payment app before the crash.

In the eyes of the market, 12 years means a complete end. According to the crypto four-year cycle, three cycles would pass with no relevance to Do Kwon.

The defense is requesting 5 years in prison.

The defense team played the "sympathy card," emphasizing that Do Kwon has already been detained in Montenegro for a long time, has shown a good attitude in pleading guilty, and has cooperated with the SEC's fine enforcement.

The 7-year gap is actually enough to fuel a day of speculation and capital games around the LUNA token.

The normal logic would be that if the founder is heavily sentenced, the LUNA token would move closer to zero. Thus, the market is filled with short positions, and we see negative funding rates;

But the main capital, or the so-called "whales," don't actually need to believe that Do Kwon will get a light 5-year sentence. They just need to use the uncertainty of the verdict to push the price up and target the overly crowded shorts.

This may also explain why LUNA surged on the eve of Do Kwon's sentencing. The market is certainly not celebrating justice, but speculating on the verdict itself.

The crypto market has already run out of hot topics and is generally sluggish, so tomorrow's hearing creates one of the few pockets of volatility.

From Victims to Predators

You wake up, and it's 2022.

If we opened LUNA's position distribution chart in May 2022, we would see an even more tragic scene:

It was crowded with Korean retail investors who lost their life savings, battered crypto funds, and speculators who tried to catch the bottom but got 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 time have long since cut their losses and left. Now, those sitting at the table may be a completely different group of participants. For example, high-frequency quant 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 noise. The only metric they care about is event beta, i.e., the sensitivity of asset prices to specific legal news.

In this context, LUNA's asset attribute has essentially mutated into a legal event-driven derivative note, just like some meme coins fluctuate based on the actions of a public figure.

This is an extremely cruel form of maturity in the crypto market: death or imprisonment itself can be "monetized."

Currently, many tokens like LUNA are essentially just shells being traded, and it is fundamentally a disaster pricing game. The main capital knows very well that the fundamentals are already zero. But as long as there is divergence, as long as there is room for long-short games, this "empty shell" is a perfect trading target.

It could even be said that precisely because there is no fundamental anchor, the token price is no longer constrained and is entirely dependent on emotional release.

As the saying goes, most tokens in the crypto market are actually memes.

Pricing Everything

After tomorrow's verdict, whether Do Kwon hears "5 years" or "12 years," the result for LUNA as a trading target may be the same.

After the event, the token will most likely become completely inactive again; not only can bad news kill the market, but so can confirmed good news.

If it's a heavy sentence, logic returns to fundamentals and the price goes to zero; if it's a light sentence, the good news is realized, and it's "Sell the News"—the profit-taking will recede like the tide.

To be fair, LUNA is actually a very good observation lens.

It once reflected a technical narrative of algorithmic stablecoins, and now it reveals the market's extreme maturity and cold-bloodedness.

In today's crypto market, even a dead coin and a founder who has already pleaded guilty can be efficiently repackaged as chips on the gambling table as long as there is a shred of news value.

The liquidity efficiency of the crypto market has evolved to the extreme; it can price anything: emotions, bugs, memes... and of course, a person's freedom and a just verdict.

In the face of such extreme efficiency, moral judgment seems a bit redundant.

Do Kwon may spend the rest of his life sadly in prison, but the crypto market has no sadness—only volatility yet to be priced.