Altcoins
Terra (LUNA) Lost 99.999% of Its Value — A Reminder of the Risks Associated with Altcoins ⋆ ZyCrypto
Today is considered one of the darkest days in the history of the crypto asset market. Terra’s LUNA cryptocurrency started to collapse during the second week of May 2022, but on May 15, 2022, the part had lost 99.999% of its valuegoing from $100 just a week before to less than $0.002 by the end of the day.
Here’s what happened during this eventful week:
The father of all dumps in crypto market history left tens of thousands of investors holding bags of worthless LUNA tokens. In total, investors would have lost more than $7 billion on this coin.
Why did LUNA collapse?
The value of LUNA was set such that fluctuations in Terra’s US Terra (UST) algorithmic stablecoin would be managed by LUNA’s liquidity. Looking back, it was an absurd model that something as fluctuating as a cryptocurrency with no use case could make a stablecoin “stable.” The UST had nothing to support it either.
Once UST lost 40% of its value, LUNA took a nosedive and has yet to recover. Some bear market traders were able to make money from the wild swings of LUNA (now LUNC), but that’s it. There have been reports of investors losing hundreds of thousands of dollars and their entire savings to the digital token. It was not a pleasant sight.
What happened to the founder of Terra?
Do Kwon, the Korean founder of the Terra Project, fled and remained a fugitive for several months before finally being arrested. caught at Montenegro International Airport, and an extradition battle began. South Korea and the United States wanted him on their soil so he could answer for his financial crimes. It was eventually decided that he would be sent to the East Asian country and he faces a long period behind bars.
Before his arrest, Do Kwon tried to imagine a solution to save the face of the symbolic project and launched another crypto to compensate those affected. The resulting coin was also called LUNA, while the previous one was renamed LUNC. But nothing saved the doomed play, and both are worthless now.
The results
The LUNA fiasco highlighted the fragility of the altcoin market. Although Bitcoin has remained relatively stable for the most part, altcoins have been mixed overall, with many coins failing. LUNA was overshadowed that same year by even bigger fraud in the form of the FTX foreign exchange scandal. Do Kwon and elder Sam Bankman-Fried, CEO of FTX remain public enemies #1 and 2 in crypto circles.
The episode reminds investors to be careful when investing in risky businesses like many altcoins.