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Difference between revisions of "LUNA Collapse in May 2022"
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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 | 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 [[stablecoin]] which can be minted with LUNA as part of the [[Terra]] ecosystem which is ran by Do Kwon. | ||
== Background == | == Background == | ||
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== Initial depeg == | == 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<ref>https://twitter.com/CaetanoManfrini/status/1523145923571814400</ref> 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<ref>https://twitter.com/LFG_org/status/1523512201088143360</ref>. | 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<ref>https://twitter.com/CaetanoManfrini/status/1523145923571814400</ref> 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<ref>https://twitter.com/LFG_org/status/1523512201088143360</ref>. | ||
== Rescue efforts and second depeg == | |||
As concern for a death spiral kept mounting, The Block reported that the Luna Foundation Guard was raising over $1b to prevent any further damages<ref>https://www.theblockcrypto.com/post/145978/luna-foundation-guard-seeks-more-than-1-billion-to-shore-up-ust-stablecoin-sources</ref>. The deal would allow several large investment firms to purchase discounted and locked LUNA tokens. | |||
[[File:Binance UST-USDT Chart.png|thumb|Binance UST Chart]] | |||
When the price of LUNA kept declining, rumours spread that the deal had fallen apart and that the bailout might not be coming after all and UST further declined to a low of $0.22. | |||
== Aftermath == | |||
Crypto fund Arca whose main holding was UST incurred significant losses and emailed investors to let them know they believed UST would regain its peg.<ref>https://www.coindesk.com/business/2022/05/11/crypto-fund-arca-doubled-down-on-ust-amid-stablecoins-collapse/</ref> | |||
US Treasury Secretary Janet Yellen mentioned the depeg event to suggest the need for further regulation of stablecoins.<ref>https://www.coindesk.com/policy/2022/05/11/ust-meltdown-hasnt-spurred-us-financial-stability-council-meeting-sources/</ref> | |||
== Sources == | == Sources == | ||
<references /> | <references /> | ||
[[Category:History]] | [[Category:History]] | ||