How LUNA crashed:
1. What Was LUNA and UST?
LUNA was a cryptocurrency on the Terra blockchain.
UST was a stablecoin meant to always be worth $1.
They worked together: if UST dropped below $1, you could trade it for LUNA to push its price back up.
2. What Went Wrong?
In May 2022, big investors sold off billions of UST.
UST dropped below $1 and lost its peg.
People tried to fix it by trading UST for LUNA.
This caused too much LUNA to be created, flooding the market.
3. The “Death Spiral”
LUNA’s supply exploded.
Its price crashed from $80 to almost zero.
UST also kept falling, hitting just a few cents.
Trust in the system was gone, and both coins collapsed.
4. Aftermath
Over $60 billion in value was lost.
The creators launched Terra 2.0 without UST.
Global regulators took notice.
Founder Do Kwon was sued and later arrested.
