1. Stablecoin lost its stability: UST, the stablecoin of the Terra ecosystem, was supposed to maintain a stable value against the dollar. But it lost its anchor, and that was the trigger for chaos. Investors lost confidence and began to sell desperately.
2. Liquidity crisis: With panic setting in, everyone wanted to withdraw their funds at the same time. However, the ecosystem did not have enough liquidity to serve everyone, creating even more problems.
3. Domino effect (or death spiral): Desperation took over. The fall in UST led investors to also sell LUNC, and the price fell without stopping. Each sale put even more pressure on prices, forming a negative spiral.
4. Lack of solid reserves: Unlike other stablecoins, UST did not have reliable reserves to support its value. This left the system vulnerable to crises like this.
5. Climate of uncertainty: The regulatory issues surrounding Terra were already generating distrust in the market. This scenario may have accelerated the collapse, as investors were already cautious.
What can we learn from this story? This episode is a warning about the risk of projects that do not have a solid and transparent foundation. In the race for success, it is essential to prioritize security, trust and good management. After all, in the crypto world, ups and downs happen – but it is always better to be prepared!
