The biggest black swan in the cryptocurrency world in 2022 took place. The Korean Luna coin, which is called the "Moutai of the cryptocurrency world" by global players, fell from US$30 to US$0.6 like a waterfall, and continued to fall to US$0.0035 the next day. The wealth of 270 billion was instantly reduced to zero.
When talking about LUNA coin, we can’t leave out UST coin. UST coin is an algorithmic stablecoin created by a Korean and developed by Terraform Labs. “The goal of UST coin is to ensure that the price is pegged to the US dollar at a 1:1 ratio. In order to maintain this value anchor, Terraform uses its public chain token LUNA as the de facto collateral behind UST coin, hoping to provide value support for UST coin. 1 UST coin is equal to LUNA coin worth 1 US dollar, that is, if the price of LUNA coin is 1 US dollar, it can be exchanged for 1 UST coin, and if the price of LUNA coin rises to 10 US dollars, it can be exchanged for 10 UST coins. And the two are in a "two-way destruction and casting" relationship. Every time 1 UST coin is minted, LUNA coin worth 1 US dollar must be destroyed.
In order to attract investors to hold UST coins, Terraform also launched the Anchor Protocol, which allows users to deposit UST coins and obtain an annualized interest rate of nearly 20%. Under the temptation of high returns, LUNA coins have been sought after by many investors, and its price has risen rapidly in 2021, from less than $1 to a maximum of $119.5, with a market value of $41 billion, and is known as the "Moutai of the coin circle."
How did the LUNA coin collapse? The sharp correction in the virtual currency market caused the LUNA coin price to fall, and the market value dropped sharply; the whales' selling of UST coins caused market panic, causing the UST coin to be depegged for a long time; the market began to sell a large number of UST coins and mint more LUNA coins, the supply increased, and the LUNA coin price fell further; the decline of LUNA coins brought the cycle back to the beginning, and so on... "After the serious depegging, since the UST coin could not quickly return to $1, the ecological mechanism itself caused the LUNA coin to maliciously inflate, triggering a 'death spiral'."
Many investors suffered heavy losses due to the plunge. Due to the collapse of LUNA coins, the value of LUNA coins held by Binance has dropped from $1.6 billion a month ago to around $2,200.
"LUNA coin was born in South Korea and has a great influence in the local area. It is estimated that more than 200,000 South Koreans have suffered losses. This incident shows that although the current market value and volume of virtual currencies have reached a certain scale, the essence is that there is no such thing as a free lunch. All gifts from fate are secretly marked with a price!
