TerraUSD, the most Terra-issued algorithmic stabilitycoin, has lost its peg with the U.S. dollar. It plummeted to $1, sending ripples across the crypto market. Terra’s sister token, Luna, also suffered some of its biggest weekly losses in recent months as prices fell 99.7% in a week, data shows.
In the last 24 hours, the LUNA price dropped 96% and is now at less than 10 cents.
The token traded at $100 and the record for the most recent publication, How to Buy Terra (LUNA), was $120 by mid-April. At the moment, LUNA’s price is $0.0001302, and it dropped from the list of top 10 cryptocurrencies by market capitalization.
CoinStats will be reviewing the history of each token, from its initial launch through the current chaotic week.
The History
Terra (LUNA) is co-founded by Do Kwon, Daniel Shin and Do Kwon. Terraform Labs’ CEO is Do Kwon. Formerly a software engineer for Apple and Microsoft, Do Kwon was also the CEO of Anyfi (a startup that provides decentralized solutions to wireless mesh networks). Kwon is included in the Forbes 30 Under 30 list of the world’s most successful entrepreneurs.
Daniel Shin, co-founder of Terra Alliance is an entrepreneur and talented economist. Prior to Terra Alliance, he founded Fast Track Asia (a startup incubator) and TMON(Ticket Monster), a South Korean ecommerce marketplace.
The project’s mainnet was launched in 2019, aiming to stabilize the global payments systems by combining the price stability of fiat currencies with the control-free and censorship-resistant blockchain technology.
Terra’s protocol uses a Delegated Proof-of-Stake (PoS) consensus mechanism. It was supported by a number of VC funds. In 2018, Binance led Terra’s $32 million round of funding. Pantera Capital and Galaxy Digital also invested in Terra in 2018.
Terra was one of most successful and promising crypto ecosystems. It aimed to create the biggest algorithmic stablecoin. A CoinDesk report stated that the blockchain has more than 1,000,000 daily active users and will have over 2 million accounts by 2020. In the same year, Terra Protocol’s DeFi and stablecoin projects launched LUNA’s market cap to 200 million USD.
Major protocols like Anchor, Nexus and Alice were all built on Terra’s platform by 2021.
According to CoinMarketCap (UST), TerraUSD was the third most stablecoin market capitalization. It also had the highest algorithmic stabilitycoin. By Total Value Locked, it was the third largest Layer 1 blockchain.
In 2021, Terra partnered with key players in the space, including DeFi Alliance, Asia DeFi Network, and Harmony. Capital commitments totaling $150 million were made to Terra Ecosystem Fund by a stellar group of investors including Arrington Capital and BlockTower Capital as well as Galaxy Digital, Hashed and Lightspeed Ventures, Pantera Capitals, Parafi, SkyVision Capital, SkyVision Capital, Parafi, SkyVision Capital, SkyVision Capital, SkyVision Capital, SkyVision Capital, SkyVision Capital, SkyVision Capital, Parafi, SkyVision Capital, SkyVision Capital, SkyVision Capital, SkyVision Capital, Parafi, SkyVision Capital It aimed at supporting “ambitious individuals looking to build incredible products.”
The calm before the storm
As 2022 rolled by, LUNA surged past tokens like Dogecoin (DOGE), Avalanche (AVAX), and Shiba Inu (SHIB) to become the world’s 10th largest cryptocurrency by market capitalization.
CoinStats charts the project’s rise and fall:
April 11, 2022
Terraform Labs contributed $1.1 million to Luna Foundation Guard, which was launched in January to expand the Terra ecosystem. It also helps to ensure the long-term sustainability of Terracoins. Kwon noted that the funds, denominated in LUNA, will be burned to mint UST to grow the LFG‘s reserves: “until it becomes mathematically impossible for idiots to claim de-peg risk for UST.”
LUNA tokens reached new highs exceeding $105.91. LUNA was the 2nd-largest staked asset of all major cryptocurrencies, in terms total value. Data from Staking Rewards revealed that LUNA had outsold Ethereum at $26 billion in staked values as of press time.
March – April 2022
Terraform Labs has announced that they will buy Bitcoin (BTC), and use it as a reserve to support the UST stablecoin. Kwon said that he would buy Bitcoin worth $10 billion to support UST. As LUNA hit its record high of $119.98, the LFG bought more than $30,000 BTC.
LFG was one of the top Bitcoin holders by April’s end, with 42.5K BTC in its Bitcoin portfolio.
May 5, 2022
LFG is now added $1.5 billion worth of BTC, The total cost was 37.863 BTC. Three Arrows Capital was involved in this transaction as well as Genesis Trading.
May 8th
The earliest reports of UST “de-pegging” appeared, and the “depeg” seemed to be the result of a few massive withdrawals from Anchor, Terra-based decentralized finance (DeFi) protocol that offers high yields to those who deposit UST. Curve liquidity pool also allowed large withdrawals of UST.
But, there were some in the community who thought it was an oxymoron. coordinated attackDue to a single wallet dumping $108 million in UST onto the Binance cryptocurrency exchange and $84 million on Ethereum blockchain.
May 9th
When the value of UST dropped to $0.60, the LFG voted to loan 750m worth of BTC to over-the-counter trading firms and loan 750 million UST to “accumulate BTC as market conditions normalize.” LUNA also fell by 52% in the wake of the chaos. Terra creator Do Kwon later clarified that the bitcoin would be “used to trade.”
May 10, 2010
Investors gave up on stablecoins and the UST prices dropped as much as $0.25 between exchanges. LUNA dropped 95% over 3 days.
April 11
Do Kwon addressed Terra’s community and apologized for the chaotic events of the last 72 hours. He argued that the only way forward “will be to absorb the stablecoin supply that wants to exit before UST can start to repeg.” He proposed a plan to assist the pegging mechanism to absorb supply and assured community members that “Terra’s return to form will be a sight to behold.”
May 12
In accordance with Kwon’s plan to absorb the UST supply, the circulating supply of Luna (LUNA) surged to more than 6.5 trillion. Despite the valiant attempts, LUNA has plummeted from $82 last week to $0.02, while UST didn’t recover its parity with the US dollar.
May 13,
Terra on Friday officially ended the blockchain block 7607789. This was after almost four days of market chaos. They announced that they had halted the blockchain at block 7607789 for a temporary period to create a plan to rebuild the ecosystem.
Another reason to stop the blockchain was the need to safeguard it from governance attacks due the low costs. Within a matter of hours, however, block production was resumed by the network with all delegations disabled.
Binance temporarily halted the withdrawals and deposits for Terra’s network on the blockchain with plans to reopen it when it achieved stability. The LUNA token was also delisted by other exchanges, signaling the end to the project’s current state.
LFG noted that it had almost entirely depleted its BTC reserves from around 80,000 bitcoins to 313. The remaining assets which mainly consisted of the crashed UST tokens and Luna tokens would be used for compensation. Luna started selling off as soon as UST fell below $1. This led to UST plummeting to below 30c and Luna being worthless.
May 16
Kwon proposed a plan called the Terra Ecosystem Revival Plan 2 to save the ecosystem: “The Terra chain as it currently exists should be forked into a new chain without algorithmic stablecoins called ‘Terra’ (token Luna – $LUNA), and the old chain be called ‘Terra Classic’ (token Luna Classic – $LUNC),” he wrote. “Both chains will coexist.” He hopes to create a new Terra chain without UST, keeping the Luna token as the new chain’s cryptocurrency. Luna trades at almost zero.
Terraform Labs and Kwon, if his plan succeeds Terraform Labs will coordinate creating the new chain.
Then, “New $LUNA will be airdropped to $LUNC stakers, holders, residual UST holders, and essential app developers,” he added.
Kwon will present a proposal to the community, which will be up for vote.
Changpeng Zhao (Binance CEO) stated however that the idea of a fork was not in his plans. would not work. Zhao stated that the idea of a fork is merely wishful thinking, and it would create nothing of value. Zhao was disappointed in Terraform Labs handling of the Luna and UST collapses and called for transparency.
May 17
Luna Foundation Guard published report of its holdings: As of May 7, the LFG held reserves of 80,394 BTC, 39,914 BNB, 26,281,671 USDT, and 23,555,590 USDC, but by May 17, only 313 BTC were left. LFG said that any remaining assets will be returned to wallets identified in dashboard.lfg.org.
May 18,
In the wake of chaos, Terra’s in-house legal team has resigned. Marc Goldich as general counsel and Lawrence Florio as chief corporate counsel have all been fired. Noah Axler was the regulatory counsel.
Kwon’s proposal for a hard fork of the Terra blockchain has been rejected by 90% of the preliminary voters. It isn’t binding, and the poll was created to help test the waters before the main vote. It seems like most members of the community are opposed to a fork, preferring a burn solution.
There you go! We’re keeping a close eye on how things unfold and will keep you updated. It’ll be some kind of miracle in cryptocurrency’s history if Terra copes with this rough patch and gets back on track. Let’s watch and see!