Altcoin
Terra (LUNA) Lost 99.999% of Its Value: A Reminder of the Risks Associated with Altcoins ⋆ ZyCrypto
Today is considered one of the darkest days in the history of the cryptocurrency market. Terra’s LUNA cryptocurrency began to collapse in the second week of May 2022, but by May 15, 2022, the coin it had lost as much as 99.999% of its valuegoing from $100 just a week earlier to less than $0.002 by the end of the day.
Here’s what happened in that eventful week:
The father of all dumps in cryptocurrency market history left tens of thousands of investors with bags of worthless LUNA tokens. Overall, investors are said to have lost more than $7 billion on this coin.
Why did LUNA collapse?
The value of LUNA was set such that fluctuations in Terra US Terra’s algorithmic stablecoin Terra (UST) would be managed by LUNA’s liquidity. In hindsight, it was an absurd model that something as fluctuating as a cryptocurrency with no use case could make a stablecoin “stable”. The FSO also had nothing to back it up.
Once UST lost 40% of its value, LUNA collapsed and has yet to recover. Some bear market traders managed to make a little money from the wild swings in LUNA (now LUNC), but that was about it. There have been reports of investors losing hundreds of thousands of dollars and their entire life savings on the digital token. It was not a pleasant sight.
What happened to the Founder of Terra?
Do Kwon, the Korean founder of Project Earth, fled and remained at large for many months before finally being rescued taken in Montenegro’s international airport and an extradition battle has begun. Both South Korea and the United States wanted him on their soil to answer for his financial crimes. Ultimately, it was decided that he would be sent to the East Asian country, and he will face a long period behind bars.
Before being arrested, Do Kwon attempted to conjure up a face save for the token project and launched another cryptocurrency to compensate those affected. The resulting coin was also called LUNA, while the previous one was renamed LUNC. But nothing saved the doomed coin, and both are now pretty useless.
Afterwards
The LUNA fiasco highlighted the fragility of the altcoin market. While Bitcoin has remained relatively stable for the most part, altcoins have been a mixed bag overall, with many coins failing. LUNA was overshadowed the same year by an even bigger fraud in the form of the FTX exchange scandal. Do Kwon and ex Sam Bankman-Fried, CEO of FTX they remain public enemy no. 1 and 2 in crypto circles.
The episode reminds investors to be careful when investing in risky ventures like many altcoins.