Curriculum·S207 Investing Frameworks (Unleveraged)·about 32 min
Entry and exit frameworks
By the end of this lesson you can
- →Write an entry rule that removes timing judgment from the moment of purchase
- →Define exit conditions before entry, including the one people never write down
- →Distinguish averaging into a plan from averaging down into a thesis that is failing
- →Read a divergence between informed and uninformed flow as a signal about your own position
Sophomore · enrolled learners
This lesson opens with Who added and who left, 7 to 9 May 2022.
- What happened
- As UST came under pressure in early May 2022, deposits in Anchor fell from about $14B on Friday 6 May to $8.7B on Monday 9 May, by the Anchor dashboard figures CoinDesk reported. Jump Crypto's analysis of on-chain depositor flows found large outflows overnight on Saturday 7 May and in the late morning of Monday 9 May, with the second set driving UST meaningfully off its peg, and found that a handful of large depositors disproportionately drove them. Over the same three days, small depositors, wallets with under $10,000 in Anchor, increased their exposure, though their positions were too small to offset the outflows. Over the following three days UST traded between about $0.95 and $0.25. Every cohort was looking at the same public blockchain, and an MIT and LSE study of the run found that wealthier and more sophisticated investors ran first and lost less, while a significant fraction of smaller investors tried to buy the dip.
- The decision point
- The small depositors were not uninformed about the price; they could see it falling, and many bought. The researchers' account is a gap in sophistication: free access to the blockchain did not level the field between people with different ability to interpret it. This lesson's reading is narrower and compatible with that one: what the small depositor most lacked was a rule, stated in advance, about what a broken peg meant for their position. Absent that rule, a falling price reads as an opportunity, and the decision gets made at the moment F106-02 identifies as least suited to making one.
What you will be able to answer
- →What is the point of an entry rule?
- →Which exit condition do people never write down?
- →What separates averaging in from averaging down?
- →What did the Anchor depositor split show?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://jumpcrypto.com/resources/the-depegging-of-ust
- https://www.coindesk.com/markets/2022/05/09/investors-flee-terras-anchor-as-ust-stablecoin-repeatedly-loses-1-peg
- https://www.dalbar.com/PressReleases/doc/2025QAIBPressRelease.pdf
- https://corpgov.law.harvard.edu/2023/05/22/anatomy-of-a-run-the-terra-luna-crash/
Confidence medium·Volatility medium·Reviewed 2026-08-06·Owner unassigned
Contested
The depositor-cohort split comes from Jump Crypto's analysis of on-chain deposit flows, which classifies wallets by their Anchor balance on 6 May (large over $1M, mid-sized $10,000 to $1M, small under $10,000) and notes missed Terra blocks on 9 May may under-report magnitudes. The direction of the finding is well supported; treat the cohort boundary as a methodological choice. The $14B to $8.7B deposit figures are the Anchor dashboard as CoinDesk reported it on 9 May 2022.
Why the cohorts behaved differently is contested. Liu, Makarov and Schoar (MIT and LSE) attribute it to sophistication: everybody could read the same chain, and it did not level the field. That the small depositors lacked a pre-written rule is this lesson's reading, compatible with theirs and not a finding of either study. Do not teach that the cohorts had equal information in any sense beyond equal access to the public data.
Nothing here is a recommendation to enter or exit anything. The lesson is about deciding rules in advance, and P10 forbids implying that any entry or exit method produces a return.