Overview

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First, two traders broke UST’s peg; next, Terraform Labs and three supporters repaired it by purchasing $2B UST; finally, the continued sell-off drained those funds The UST price fell from ~US$1 to about 30 cents early today, while LUNA (a non-stablecoin that drives the Terra network) lost most of its own value and was trading LUNA, which was trading at above $60 as recently as May 9, is now changing hands at $0. . At the time of writing, the Terra blockchain has been halted for LUNA was trading at $86, down from its all-time high of $119 one month prior, while UST was holding its peg steady at $1 with a total market cap of $18.6b. As well Terra LUNA and UST de-peg were a massive blow to the crypto community. It was one of the most appalling events in crypto history. Through the analysis below, we try to determine what Within a matter of days, the amount of LUNA in circulation went from a few hundred thousand to 6.5 trillion, which caused its value to go to nearly $0 and UST to trade

Terra UST Saga: LUNA Plummets to $0.0, Supply Inflates by 273% - What Happened?

The Terra LUNA and UST de-peg was a massive blow to the crypto community. It was one of the most appalling events in crypto history. Explore the dramatic collapse of Terra\'s algorithmic stablecoin UST and its sister token LUNA, which saw its supply inflate by an astounding 273% and its price plummet to near zero. What caused this catastrophic failure, and what are the implications for the broader cryptocurrency market?

The UST De-Peg: A Chain Reaction

The trouble began with a destabilization event. As outlined, "First, two traders broke UST’s peg; next, Terraform Labs and three supporters repaired it by purchasing $2B UST; finally, the continued sell-off drained those funds." This initial attempt to defend the peg proved futile.

LUNA\'s Freefall: From $60 to $0.0

The impact on LUNA was devastating. LUNA, which was trading at above $60 as recently as May 9, is now changing hands at $0. . Previously, LUNA was trading at $86, down from its all-time high of $119 one month prior, while UST was holding its peg steady at $1 with a total market cap of $18.6b. The attempt to maintain UST\'s value triggered hyperinflation of LUNA. Within a matter of days, the amount of LUNA in circulation went from a few hundred thousand to 6.5 trillion, which caused its value to go to nearly $0 and UST to trade significantly below its intended $1 peg.

How UST Lost Its Peg: A Deep Dive

The UST price fell from ~US$1 to about 30 cents early today, while LUNA (a non-stablecoin that drives the Terra network) lost most of its own value. At the time of writing, the Terra blockchain has been halted for a period, highlighting the severity of the situation. Through the analysis below, we try to determine what ultimately led to the collapse.

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