Difference between revisions of "LUNA Collapse in May 2022"

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== Sources ==
== Sources ==
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[[Category:History]]

Revision as of 22:54, 11 May 2022

In May 2022, bearish crypto conditions resulted in the depeg of subsequent collapse of LUNA which crashed from over $80 to $0.69 in the space of five days. UST is the stable coin which can be minted with LUNA as part of the Terra ecosystem which is ran by Do Kwon.

Background

UST is a stable coin which can be minted by burning LUNA. Its redemption mechanism lets a user mint LUNA by burning UST which puts further sell pressure on the stablecoin peg. In case of a depeg event, this mechanism can put severe pressure on LUNA as more people burn UST to then sell LUNA.

To alleviate concers about a death spiral, the Terra foundation purchased several billions of Bitcoin that could be used to help stabilize the peg in case of pressure on UST and LUNA.[1]

Initial depeg

Over the 7th of May, 9 figures of liquidity was removed from the Curve Finance pool resulting in widespread panic and a depeg of around 2% which was quickly brought under control. DoKwon implied on Twitter[2] there had been a coordinated attack to create panic and destabilize the peg by simulatenously removing funds from Anchor and Curve Finance. The Luna Guard Foundation also announced it had loaned $1.5b as a further effort to protect UST[3].

Sources