Before Do Kwon's trial, $1.8 billion is betting heavily on his prison sentence

Written by: David, Deep Tide TechFlow

As of the evening of December 10th, what you might not have noticed is that the contract data for the LUNA token is extremely outrageous.

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

Meanwhile, LUNA itself has surged by 150% over the past week.

In comparison, the combined trading volume of LUNA and LUNA2 now ranks roughly in the top ten of the entire market contract trading volume, second only to HYPE’s 1.88 billion USD.

Their funding rates are -0.0595% and -0.0789%, respectively.

High negative funding rates mean that the market is not only crowded but also in an extreme state of divergence: large funds are shorting, while an even larger pool of capital is using this congestion to squeeze the shorts.

We all know that LUNA no longer has much of a fundamental basis. This 1.8 billion USD liquidity is actually trading an almost-determined wager:

Tomorrow, December 11th at 24:00, the former “stablecoin king” Do Kwon will face his final sentencing hearing at Court 1305 in the Southern District of New York.

The market is betting real money on this former crypto industry heavyweight’s prison sentence.

The sentence may be long or short, but speculation will not stop.

To understand this 1.8 billion USD 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 of 2022.

But in fact, this former crypto tycoon was already extradited to New York City at the end of 2024. In August of this year, he formally pleaded guilty in the Manhattan Federal Court, admitting to multiple charges including securities fraud.

Tomorrow’s hearing is not about whether he is “guilty or innocent,” but about the final judgment on the length of his sentence. According to the latest court documents, there is a huge gap between the prosecution and defense recommendations:

Prosecution advocates for 12 years in prison.

The U.S. Prosecutor’s Office is firm, citing billions of dollars lost in the Terra collapse and Kwon’s fraudulent “falsified on-chain” claims about the Chai payment app before the collapse.

In the market, 12 years signifies a complete end. Based on the four-year cycle of crypto, that cycle has already gone through three rounds and is largely disconnected from Do Kwon.

The defense requests 5 years in prison.

Their argument appeals to “sympathy,” emphasizing that Do Kwon has been detained in Montenegro for some time, has shown a good attitude toward admitting guilt, and has cooperated with SEC fines.

A 7-year gap is enough to fuel intraday speculation and capital battles around the LUNA token.

The logical expectation is that the founder will be heavily sentenced, and LUNA tokens will likely further devalue toward zero. Therefore, the market is flooded with short positions, as evidenced by negative funding rates;

But the main funds, or the whales, don’t necessarily believe Do Kwon will actually get a 5-year sentence. They only need to exploit this uncertainty, reverse the price trend, and target overly crowded short positions.

This perhaps also explains why LUNA surged dramatically on the eve of Do Kwon’s trial. The market is definitely not celebrating justice but speculating on the outcome of the verdict itself.

The cryptocurrency market, which was already lacking hot topics and generally weak, will see only limited local volatility from tomorrow’s hearing.

From victim to predator

You’re awake now, but it’s 2022.

If we look at the LUNA holdings distribution chart back in May 2022, it would paint a much more tragic picture:

It was filled with Korean retail investors who lost their life savings, heavily impacted crypto funds, and speculators trying to bottom fish but buried in losses. Back then, trading was full of anger, despair, and irrational self-rescue.

Today, three years later, the microstructure of the market has undergone a thorough overhaul.

The victims of that time have already cut their losses and exited. Now, sitting across the table are perhaps a completely different set of participants, such as high-frequency quantitative teams, event-driven hedge funds, and speculators hunting “junk assets.”

For these new players, whether Do Kwon is innocent or whether the Terra ecosystem has a future is irrelevant— even noise. Their only concern is the event beta (Event Beta), that is, the asset’s sensitivity to specific legal news.

In this context, the asset property of LUNA has essentially transformed into a derivative ticket around legal issues—similar to how certain meme tokens fluctuate based on the actions of a public figure.

This is an extremely harsh form of market maturity in crypto—death or imprisonment can itself be “monetized.”

Currently, even many tokens with only a shell are fundamentally just disaster-priced assets. Major funds are well aware that the fundamentals have already zeroed out. But as long as divergence exists, and there’s room for bulls and bears to battle, this “shell” is a perfect trading target.

It can even be said that because there is no fundamental anchor, the price volatility of tokens is no longer constrained and depends entirely on emotional outbursts.

It also confirms that, in crypto, most tokens are actually memes.

Pricing everything

After tomorrow’s verdict, whether Do Kwon hears “5 years” or “12 years,” the outcome for the trading asset LUNA may ultimately be the same.

Once the event concludes, the token will likely become even more dormant; not only bad news will kill the momentum, but confirmed good news as well.

If it’s a heavy sentence, the logic reverts to fundamentals, and the price could go to zero; if it’s a light sentence and positive news is realized, it’s a “Sell the News” situation, and profit-taking will wash out like a tide.

Honestly, LUNA is a very good mirror for observation.

It has reflected the technical narrative of a stablecoin algorithm and also exposed the market’s extremely mature and cold-blooded side.

Today’s crypto market, even with a dead coin and a guilty founder, can be quickly repackaged into a betting chip on the trading table as long as there’s a hint of news.

Liquidity efficiency in crypto has evolved to the highest level; it can price anything: emotions, bugs, memes… and of course, a person’s freedom and a form of justice.

In front of such extreme efficiency, moral judgment seems somewhat unnecessary.

Do Kwon’s future life may be spent sorrowfully in prison, but the crypto market has no sorrow—only volatility that remains unpriced.