LUNA Completely Crashes

On 13 May 2022, the LUNA coin of the Terra blockchain crashed by almost 100%. Terra has also halted its blockchain which means it will not add any further transactions until further notice. You can see a snap from CoinMarketCap below.

This began to take an ugly turn when the Luna Foundation sold its reserve Bitcoins to stabilize its stable coin UST (USD pegged Terra). The foundation sold over $750 Million worth of Bitcoins in the market to redeem its stable coin.

Terra USD and Stablecoins

The blockchain was halted due to a number of reasons. Due to the de-peg in stable coin prices, people began to offload UST in massive quantities. The UST Terra as of now has lost more than 84% of its value which should remain at $1.

This led to a panic rush in even the biggest stable coin USDT which also eventually lost its peg albeit by a small margin. Stable coins were earlier perceived to be relatively stable and therefore a refuge in case of any market crisis, but this notion fell on its face as the most popular stable coin has been struggling for maintaining its peg. Read more about stable coins here.

Terra Blockchain Halted

After people began offloading Terra’s UST and LUNA the blockchain was officially halted. This was due to several reasons. One is the reduced cost of a hostile takeover of the system as the token is worthless now. Further, there could be attacks on the blockchain that could disrupt the entire ecosystem’s infrastructure.