👽SUDDEN DROP👽
🚀Let's talk about what happened to LUNC in 2022?
Luna Classic (LUNC), formerly known as Terra (LUNA), experienced a dramatic crash in May 2022 due to a series of events primarily related to its stablecoin, TerraUSD (UST).
So what exactly happened?
1. Stablecoin Mechanism🚂
~UST: TerraUSD was an algorithmic stablecoin meant to maintain a 1:1 peg with the US dollar.
~LUNA: LUNA was used to maintain UST's peg through a burn-and-mint mechanism. When UST's price fell below $1, it could be exchanged for $1 worth of LUNA, and vice versa.
2. Market panic🫨
~In May 2022, UST lost its peg to the dollar, dropping significantly below $1.
~Investors panicked and started mass selling both UST and LUNA.
3. Hyperinflation🤑
~To restore UST's peg, a large amount of LUNA was minted.
~The sudden and excessive minting led to hyperinflation, causing LUNA's price to plummet.
4. Death Spiral 😵🌀
~As more LUNA was created, its value decreased rapidly.
~The plummeting value of LUNA undermined confidence in both LUNA and UST.
~This triggered a feedback loop, further devaluing both tokens.
5. Market Reactions🏛️
~Major exchanges delisted LUNA and UST.
~Investors lost confidence in the Terra ecosystem.
~The overall crypto market saw increased volatility and panic.
6. Aftermath💥
~The collapse led to significant financial losses for investors.
~Regulatory scrutiny on stablecoins and algorithmic mechanisms increased.
~Terra's community rebranded LUNA to Luna Classic (LUNC) and launched a new token, Terra (LUNA 2.0).
What are your thoughts? Did u hold LUNC when its price dropped so bad? Let me know!
