That institution allegedly dumped massive sums of BTC and UST on the market, resulting in a liquidation avalanche of leveraged longs, slippage, and panic selling by investors, with many liquidating their LUNA holdings unstaking their UST to sell it. They subsequently exchanged a significant sum of BTC for UST at a discount with Do Kwon over the counter (OTC). He indicated that a huge organization had borrowed 100,000 Bitcoin from the Gemini exchange on Twitter. Charles Hoskinson, the inventor of Cardano, proposed one possibility, although he later removed the tweet.
However, some have speculated that an attacker attempted to break UST in order to profit from shorting bitcoin - that is, betting on its price going down. Whether this was a planned move or just the heat of the moment could be debated in detail. However, the speed breaker changed the game as only $100 million worth of UST could be burned for LUNA in a day. As expected, people rushed to take advantage of the arbitrage by exchanging 90 cents worth of UST for $1 worth of LUNA. This could have triggered the volatility and the market sentiments, eventually affecting the cryptocurrency’s prices. On May 7, 2022, over $2 billion worth of UST was unstaked, and hundreds of millions of that were immediately sold.While there are multiple theories as to what went wrong, here are a few that could probably make sense: However, the 2022 beginning was not great for LUNA. * Switch fees are charged when users transition between LUNA and a Terra stablecoin.īefore this drop, LUNA was the tenth-largest cryptocurrency, according to Coinmarketcap, with a total market cap of nearly $34 billion, overtaking Polkadot and Avalanche. Users who staked LUNA received payouts derived directly from Terra protocol switch fees*. Furthermore, the Terra ecosystem’s consensus process allowed LUNA holders to stake their tokens. As per the founders’ plans, people were meant to be able to exchange one for the other (LUNA for UST and vice versa) if one of the two dropped below that price.įrom the use cases angle, other than payments, lending, borrowing, and donating, LUNA lets users pay network fees, vote in elections, invest in the Tendermint Delegated Proof of Stake consensus method, and peg stablecoins. As the laters name suggests, the United States Dollar is linked to TerraUSD. Luna (LUNA) and TerraUSD (UST) are two native tokens of the Terra network, a blockchain-based project developed by Terra Labs in South Korea. They are a widespread means of exchange, typically utilized by traders to shift cash around and speculate on other cryptocurrencies during the market upheaval. *Stablecoins are digital currencies tied to conventional assets like the U.S. Terra (LUNA) and TerraUSD (UST) are the two crypto coins that make up Terra. The Terra protocol generates stablecoins that monitor the price of a fiat currency over time (a government-backed currency such as the U.S. Terra stablecoins could be instantaneously spent, saved, traded, or exchanged thanks to the Terra blockchain. Terra is an open-source blockchain technology for an algorithmic stablecoin*, a type of cryptocurrency that tracks the price of currencies or other assets. Here is a snapshot view of what the steep decline looked like: In a matter of time, this algorithm-backed altcoin dropped by 97%, sending shivers across the spines of all investors.
LUNA was worth $0.01862 as of noon Thursday, May 12, 2022, and as of May 16, 2022, it is floating at $0.0002436 according to. LUNA, a cryptocurrency linked to the TerraUSD stablecoin, is now essentially worthless.
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