Luna coin goes from $86 to $0.00009

GKhan's picture

'Evil genius' may have caused Terra and Luna cryptocurrencies to crash | The Business

Luna coin crashed over the weekend. All the details are coming in on why... Here's a rough summary and check out the twitter link too.


Rough week for crypto. 

Especially LUNA which wasn't on Bitbuy until this past Monday.

It lost almost 100% of its value in a matter of days and has tried to take the rest of crypto with it. 

It's death spiral may have occurred due to  market manipulation - which we'll get to later. 

For those new to LUNA, it’s the native token of the Terra blockchain.

Where the LUNA story gets more complex is with UST - a USD pegged algorithmic stable coin on the Terra blockchain.

LUNA and UST are like 2 sides of the same coin.

See… LUNA is used to stabilize UST price. When UST is above $1 USD LUNA gets burned. When UST is below $1 USD LUNA gets minted.

This is how balance is maintained within the Terra ecosystem.

Now, let me introduce the Anchor Protocol – it’s a lending and borrowing platform in the Terra ecosystem.

To incent adoption, Terra provided a 20% APY (annual percentage yield) to stake UST.

Eventually many billions of dollars were staked for that insanely high APY.

Recently, Do Kwon (one of the Terra founders) announced they were buying billions of Bitcoin for their UST reserves.

At the time, it was a big story. Since backing an algorithmic stable coin with Bitcoin was a somewhat novel idea. Plus, having a large Bitcoin buyer provided some needed market optimism.

Ok, now the scene is set. 

The explanation may go something like this...

Credit to this Twitter thread. 

Large market participant(s) borrowed 100K BTC.

Swapping 25K BTC for UST.

The large market participant(s) then swapped more BTC for UST in an OTC transaction with Terra. Further lowering UST liquidity.

Then, the large market participant(s) dumped their BTC and UST. Creating massive slippage. Triggering a cascade of forced selling in both assets. In the hopes of triggering a larger mass selloff in LUNA and a further de-pegging of UST.

And now, both LUNA and UST are in somewhat of a death spiral.

Marching both towards ZERO.

As of yesterday afternoon, Terra halted its blockchain and many exchanges have suspended LUNA trading (including Bitbuy).


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