LUNA from $120 to $0.0001: What happened?

Until recently, LUNA, the coin of the Terra blockchain, was one of the most valued crypto currencies in the market. With a market cap of over $40 billion at its peak, and on the 6th place in the list of largest cryptocurrencies, according to market cap.

Untill it suddenly changed and Terra USD (UST), the stablecoin of the Terra blockchain, lost its peg. This stablecoin was suddenly no longer stable, and the price shot below $1. As a result, the price of both UST and LUNA collapsed completely. But what exactly happened?

LUNA and UST

LUNA and UST are thus the most important coins on the Terra blockchain. The two are also linked together, in a mechanism that should ensure that UST remains stable at $1. This works as follows: when someone buys 1 UST (which should therefore be $1), LUNA is burned for $1. The same is true the other way around: when someone sells 1 UST, $1 is minted off LUNA.

So now UST lost its peg, which according to rumors happened because traditional investment parties sold UST massively in the market. As a result, the price of UST dropped below $1 and panic ensued pretty quickly.

First of all, UST was sold en masse, causing a huge amount of LUNA to be minted and the number of coins in circulation to increase significantly.

This drove the price down and, coinciding with the panic, LUNA started a big drop. Nobody knew where the bottom would lie and so far it appears to be around $0.0001, where LUNA was still worth $120 per coin in November.

There are several stories on Twitter of people who lost millions to this insane crash. On among them was youtuber and rapper: KSI, who lost $2.8 million in LUNA, he took the serious hit well, and posted on Twitter he’ll be back the next bull run.

Others were not so hopeful and were financially devastated.