LUNA Crashed 100% | What You Need To Know

#LUNA #TerraUSD #Crypto
Within just a few days, the cryptocurrency TerraLUNA crashed 100% from over $100 to fractions of a penny. This crash resulted in many people losing a ton of money and even effected the entire crypto market temporarily. You might find yourself wondering how in the world did this happen?

To understand what happened we first have to acknowledge that LUNA is the sister coin to the stablecoin TerraUSD also known as UST. Unlike other stablecoins that are backed by real assets such as the dollar, some stablecoins reply on complex algorithms to maintain its peg to the dollar by a system of minting and burning.

TerraUSD is one of these algorithmic stablecouns that maintains its peg to the US dollar by using linked cryptocurrency LUNA.

The reason why LUNA and UST came crashing down is because Citadel and BlackRock offered to sell a large amount of BTC at a discounted price to Do Kwon, the founder of Terra. He took the bait as they wanted him to do which gave citadel and blackrock a large portion of Terra’s liquidity.

In an article by Coindesk, they talk about this thing called the “Anchor Protocol” which acts as a high yield savings account for UST. In the article they say that about 75% of all UST was held on anchor. Citadel and BlackRock knew that Anchor was a big ponzie scheme and if they dumped their position of UST, it would cause more withdraws than Anchor would be able to repay.

This caused a massive sell off of UST which ended up ballooning the supply of LUNA and plummeted the price. This caused the balancing mechanism between TerraUSD and LUNA to break and stop functioning.

Since Terra is an algorithmic stable coin, it's going to be very difficult for the project to make a comeback. However, people on WallStreetBets are already hopping on the LUNA train to try and ride the thing back up in hopes for huge gains. It should be noted that this play is very very risky so if you’re speculating do your research, have a plan, and never invest more money than you’re willing to lose!

And I am of course not a financial advisor so anything in this video shouldn’t be taken as financial advice.

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