Terra LUNA: From Top 10 Crypto to Crashing 99%, Here’s What Happened

Vinod Dsouza
terra luna ust crash
Source: Pixabay

Terra (LUNA) stood strong as a rock under the top 10 list of cryptos for a year until it fell from grace. The crypto is now at 74th position and could soon be out of the top 100. Talks on social media are doing the rounds that LUNA might well be on its way to reaching $0. However, we’ll have to wait and watch if the scenario really plays out or is mere speculations during the fall. Searches on Google for ‘Why is Terra crashing’ have also hit the roof as investors are eager to know the reason.

Read More: UST stumbles to $0.45 as Do Kwon unveils “recovery plan”

Why Is Terra (LUNA) & UST Crashing?

terra luna ust crash
Source: Pixabay

PART – 1: Mysterious Whale Dumps TerraUST

The crash played out after one mysterious and anonymous whale dumped $285 million worth of UST in the open market. The whale dumped the massive holdings between May 7th and 8th, 2022. The sheer volume of the dump throws UST off the balance of its 1:1 USD peg. UST moved to $0.98 after the exit and opened doors for a freefall thereon. The enormous dump was made on the Curve and Binance app by a single large player and the token eventually went off the rails.

“Massive $285 million UST dump on Curve and Binance by a single player followed by massive shorts on Luna,” said Caetano Manfrini, a legal officer at GEMMA, a Brazil-based crypto firm.

PART – 2: The Market Moved in Accordance With The Dump

Once UST got depegged, many big players played massive shorts sending the token on a downward spiral. There was no coming back to safety from here and its fall seemed to have been ‘written on the walls’. Everybody knew that it would plummet and stayed out of it to protect their finances.

Since UST is pegged to the USD, Terra maintains a collateral reserve for its LUNA tokens. Therefore, whenever UST exceeded $1, investors were incentivized by Terra protocol to burn LUNA and mint UST. The same occurred in reverse when UST dropped below $1 to maintain balance and stability. Now that the UST-USD is depegged, the balance fell off the roof and slumped to $0.40.

Read More: Elon Musk falls under SEC’s radar following delayed disclosure of Twitter Stake

PART 3 – The Damage Is Done & Trust Is Lost

Terra is now trading at $0.15 and is down 98% in the last 24-hours. Investors have lost trust in the project and are also questioning its founder Do Kwon’s background in the financial system. Ex-Terra employees alleged that Do Kown was behind the previous failed stablecoin ‘Basis Cash’. Read here to know more about the accusations.