The $40B Wipeout: The Fall of Terra Luna Told in a Sequence of Tweets
Who is Luna’s founder? Do Kwon is a Stanford-dropout and computer scientist based in South Korea. He founds Luna as a new kind of stablecoin. Whereas most stablecurrencies work by depositing USD and swapping that 1-for-1 for the cryptocurrencies, Luna works differently.
Join Coinmonks Telegram Channel and Youtube Channel learn about crypto trading and investing
$LUNA is algorithmically pegged to $UST, and this works better because it means that they don’t have to store any real-life currencies.
Do Kwon gains fame (or infamy) for his outspokenness on Twitter, who, even after the crash, still has more than 1 million followers on Twitter.
Alright, let’s start at the beginning. In November of 2021, an amateur financial analyst, Freddie Raynolds, calculated that if an individual or organization had access to $1B they could theoretically crash the Terra Luna cryptocurrency. They had the potential to make huge gains from the crash.
Do Kwon clapped back and promptly dismissed the prediction on twitter.
In the mean time, Do Kwon continues to make himself unpopular on twitter, calling his critics and sceptics ‘poor’.
A trader, fed up with his arrogant behaviour, challenges Do Kwon with a $1,000,000 bet that the price of Luna will drop in the next year. The pseudonymous trader Gigantic Rebirth one-ups this, with the offer of a $10,000,000 bet. Do Kwon accepts.
Meanwhile many amateur crypto traders start to become more bullish on Luna and UST. They see it as an ideal solution, because it relies on novel algorithms to peg $LUNA to its sister-currency $UST.
Evidence emerges that Do Kwon is the founder of a previously-failed cryptocurrency, where he remained pseudonymously known as “Rick”, along with his cofounder “Morty.”
Do Kwon’s cultlike, devoted following defend him from the criticism that he receives. He continues to run Luna.
The attack that Freddie Raynold’s predicted takes place. Due to the high transaction volume, Luna becomes de-pegged from UST, causing its price to crash.
Traders start to panic-sell, further dropping the price.
Conspiracy theories emerge that blame Citadel, Blackrock and the Winklevoss twins’ Gemini are to blame for the crash. All three companies deny being involved.
Some investors, believing they are “buying the dip”, continue to buy into $LUNA, expecting its price to return to its pre-crash levels. Alas, it ain’t a dip if the price ain’t gonna rise no more.
$LUNA continues to plummet.
The Luna Foundation Guard decides to sell its reserves of Bitcoin, hoping that it can bail out Luna. It is unsuccessful.
The price of Luna continues to fall all the way down to $0.01.
Traders around the world mourn their losses after the currency crashes 98%, wiping over $40B in market value.
Justice is served. The two traders who bet against $LUNA initially now want their money.
The volatile state of Luna means that it is delisted from a major crypto platform Binance.
Finally, Do Kwon responds. He apologises for his mistakes. He faces no legal consequences for his actions.
Has he learned his lesson?
Nope! I guess he didn’t learn his lesson.
Just days after the crash, Do Kwon starts promoting Terra 2.0 as the next step. He faces a huge amount of criticism, and calls for legal action against him to take place.
He remains free to this day.
That’s it for this article! Thanks for reading, and I hoped it brought you some entertainment.
If you enjoyed this article, let me know and I’ll do more on some of the other dramatic crashes. The implosion of Fast next?
And, if you enjoyed this article, please give us a 👏!
