😭😭😭INVESTORS LOST 40 BILLION DOLLARS IN A DAY😭😭😭

👆👆👆UNKNOWN HISTORY👆👆👆

💥 The Terra (LUNA) crash is one of the biggest disasters in cryptocurrency history. Once a leading project with a market cap of billions, the Terra crash sent shockwaves through the industry, wiping out fortunes and undermining trust.

In this topic, I will analyze how Terra's ambitious algorithmic stablecoin model collapsed, the events that led to its downfall, and the critical lessons every cryptocurrency investor should learn from this fiasco.

Let's delve into the history of Terra (LUNA) and its dramatic fall

---💥💥 Terra was a blockchain project that aimed to revolutionize payments with its algorithmic stablecoin, UST.

Unlike traditional reserve-backed stablecoins like USDT or USDC, UST was designed to maintain its peg to $1 through a complex relationship with Terra's native token, LUNA.

---💥💥💥 The idea was simple: users could always exchange 1 UST for 1 dollar worth of LUNA and vice versa, with LUNA being burned to create UST and stabilize its price.

But, as we will soon see, the algorithmic model had critical vulnerabilities: when the system was stressed, the very mechanism designed to stabilize the UST turned into a death spiral.

---💥💥💥💥In May 2022, UST began to lose its peg to $1 after significant withdrawals from Anchor, a DeFi platform that was critical to the Terra ecosystem.

Anchor offered a high annual return of almost 20% on UST deposits, attracting a huge portion of UST — over 70% of the total supply.

---💥💥💥💥💥 When concerns about sustainability arose, users rushed to withdraw their funds, creating sudden selling pressure on UST.

When the value of UST dropped below $1, the mechanism to restore the peg was to create more LUNA, but this only flooded the market and caused the price of LUNA to fall.

---💥💥💥💥💥💥 The crisis quickly escalated. UST completely lost its peg to $1, falling to $0.10.

Meanwhile, the supply of LUNA has increased from around 350 million tokens to over 6.5 trillion in a desperate attempt to restore the value of UST. This has led to the price of LUNA falling from over $80 to almost $0.0001 in just a few days.

Major exchanges began delisting LUNA and UST due to their extreme volatility, and Terra's market cap of around $40 billion disappeared virtually overnight.

---💥💥💥💥💥💥💥 During Terra's collapse, all eyes turned to Do Kwon, the project's outspoken founder. Known for his confidence and bold statements, Do Kwon was a vocal supporter of Terra's success, often dismissing critics.

But when UST and LUNA crashed, his tone changed from challenge to damage control.

The team attempted to re-peg UST by implementing emergency measures such as creating trillions of LUNA and using billions of Bitcoin reserves to try to stabilize the situation. However, these efforts were too little, too late, and the downward spiral continued.

---💥💥💥💥💥💥💥💥 Do Kwon announced plans for a "recovery", proposing to distribute the Terra blockchain and launch a new LUNA token, but the project's credibility had already been undermined.

The community was divided, and many investors felt betrayed. Lawsuits and investigations into the Terra collapse soon followed, and Do Kwon faced growing legal scrutiny and calls for accountability.

---💥💥💥💥💥💥💥💥💥 The controversy grew as it became known that, despite his previous denials on Twitter, Do Kwon did indeed control the burn wallet and had access to the keys.

His involvement in managing the LUNA supply played a crucial role in the collapse of the ecosystem.

---💥💥💥💥💥💥💥💥💥💥💥The Terra collapse has caught the attention of regulators around the world, raising concerns about investor protection and leading to calls for stricter regulations in the cryptocurrency sector.

Authorities have begun to scrutinize algorithmic stablecoins and DeFi projects, with some countries launching investigations into Terra for possible fraud and market manipulation.

Lawsuits against Terra, Do Kwon, and others quickly followed. South Korean prosecutors issued an arrest warrant for Do Kwon, making him a key figure in the legal fallout.

---💥💥💥💥💥💥💥💥💥💥💥💥 After months of being wanted and facing numerous legal challenges, Do Kwon was finally apprehended in March 2023.

Authorities caught up with him in Montenegro, where he was found with a fake passport. His arrest marked a significant turning point in the aftermath of the Terra crash, as international authorities, including South Korea and the United States, had been actively pursuing him for his role in the disaster.

The arrest has increased scrutiny of Kwon, with legal proceedings focusing on allegations of fraud, market manipulation and misleading investors.

---💥💥💥💥💥💥💥💥💥💥💥💥💥💥 The Terra crash exposed the risks of algorithmic stablecoins and high-yield DeFi projects. It showed how quickly things can fall apart when stability is questionable.

The main conclusion: always understand the risks before investing in cryptocurrency.

In such a volatile industry, even great projects can fail. Be careful, never invest more than you can afford to lose, and always do your research.