#MastertheMarket

Do you remember the #LUNA Tragedy?

The collapse of Terra (LUNA) and TerraUSD (UST) in mid-2022. This was one of the biggest failures in the cryptocurrency world that affected many investors.

LUNA is the native token of the Terra blockchain, while UST is a stablecoin designed to maintain a 1:1 value against the US dollar. UST uses algorithms to maintain price stability, by "minting" and "burning" LUNA to adjust the supply of this stablecoin.

However, in May 2022, UST began to lose its peg to the US dollar, which caused investors to panic and sell UST in large amounts. To try to maintain the value of UST, the system started printing more LUNA, but this actually led to massive inflation and a drastic drop in the value of LUNA.

As a result:

The value of LUNA fell by almost 100%: LUNA, which was previously trading at hundreds of dollars, suddenly fell to less than one cent.

UST lost stability: UST could no longer be maintained at a 1:1 value against the dollar, creating great uncertainty in the market.

Massive losses for investors: Many people lost their entire investments, and a significant amount of money simply evaporated.

This tragedy worsened trust in algorithmic stablecoins and highlighted the potential risks in systems that rely on mechanisms that are not fully proven. It also prompted regulators to start paying attention and to tighten regulations on the cryptocurrency market.