🚀🌟 WHEN LUNA CRASHED TO $0 IN 1 DAY! 🌟🚀
Terra, the ambitious network created by Do Kwon and Daniel Shin, aimed to transform the payments landscape through its blockchain and stablecoin ecosystem. In 2022, $LUNA and UST tokens were at the heart of all discussions in the crypto sector, attracting a crowd of investors.
UST, an algorithmic stablecoin, was supposed to maintain a stable price of $1 by being backed by LUNA tokens. Unlike traditional stablecoins, UST relied on algorithmic mechanisms and market incentives rather than concrete reserves.
The Anchor Protocol, promising up to 20% annual returns on UST deposits, had attracted a massive amount of UST, accounting for 75% of the total supply, raising concerns about its viability.
In early May 2022, a massive $2 billion withdrawal wave from UST caused it to lose its peg, dropping its value to $0.91, triggering widespread panic and increased instability.
This loss of peg led to a glut of LUNA as traders converted their depreciating UST into LUNA, causing the price of LUNA to collapse. Major exchanges quickly delisted LUNA and UST, and the Terra blockchain was temporarily paused.
This collapse wiped out around $60 billion from the crypto market. Prominent companies such as Voyager, Celsius and Three Arrows Capital suffered heavy losses, leading to bankruptcies and forced liquidations.
In response to the crisis, the Luna Foundation Guard attempted to stabilize UST using its Bitcoin reserves, but was unsuccessful. Do Kwon's attempts to revive confidence, including the launch of Terra 2.0, proved ineffective. Kwon has often misled the public about the stability of his tokens.
Before the crash, he had even bet $1 million on the stability of LUNA and the sustainability of UST. On September 15, 2022, an arrest warrant for fraud and illegal fundraising was issued for Do Kwon by South Korean authorities. He allegedly transferred 40,000 $BTC to secret wallets, which further damaged his reputation.
In March 2023, Kwon was arrested in Montenegro while trying to travel to Dubai with falsified documents. He was sentenced to four months in prison for falsifying documents, and South Korea and the United States are now seeking his extradition.
The collapse of $LUNA-UST is a stark reminder of the dangers of algorithmic stablecoins and the promises of sky-high returns. It highlights the critical importance of transparency, rigorous risk management and strict regulatory oversight in the cryptocurrency space.
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