🚨 Terra (LUNA/UST): Scandal That Shook the Market and Prices! 📉
The collapse of Terra (LUNA/UST) in May 2022 was one of the loudest scandals that hit the entire crypto market hard.
What is Terra?
UST (TerraUSD): Was an algorithmic stablecoin that was supposed to maintain $1 through a mechanism with LUNA.
LUNA (Terra): The system token that regulated the price of UST.
May 2022 Catastrophe:
UST lost its peg: It started falling below $1, causing panic.
"Death Spiral" of LUNA: The algorithm mass-released LUNA to stabilize UST. This caused hyperinflation of LUNA.
Price Collapse:
Original LUNA (now LUNA Classic/LUNC), which once cost over $100, fell to nearly zero in a matter of days.
New LUNA (LUNA2), launched after the collapse, peaked at only around $18-19, and could not restore former trust.
Billions of dollars of investors were lost.
Causes and Consequences:
Vulnerability of the UST algorithm: Dependence on LUNA proved unstable against massive sell-offs.
Eroded trust: The DeFi sector and algorithmic stablecoins were severely affected.
Increased regulatory pressure on crypto worldwide.
The collapse of Terra is a bitter but important lesson about the high risks and unpredictability of the crypto market. Always be cautious and conduct your own analysis!
