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Difference between revisions of "LUNA Collapse in May 2022"
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== Background == | == Background == | ||
UST is a stable coin which can be minted by burning LUNA. | UST is a stable coin which can be minted by burning LUNA. The redemption mechanism lets a user mint LUNA by burning UST which put further sell pressure on the stablecoin peg. In case of a depeg event, this mechanism adds severe sell pressure on LUNA as more people burn UST to then sell LUNA. | ||
To alleviate concerns 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.<ref>https://dashboard.lfg.org/</ref> | To alleviate concerns 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.<ref>https://dashboard.lfg.org/</ref> | ||