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- Terra, the third largest cryptocurrency ecosystem after Bitcoin and Ethereum, collapsed in three days in May 2022 and wiped out $50 billion in valuation. At the center of the collapse was a run on a blockchain-based borrowing and lending protocol (Anchor) that promised high yields to its stablecoin (UST) depositors.
www.nber.org/papers/w31160
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Jun 1, 2022 · Its companion token, LUNA, which was meant to stabilize UST's price, fell from $80 to a few cents by May 12. CoinDesk followed and reported on the rise and the ultimate demise of the...
May 11, 2022 · In order to shore up UST’s price, the Luna Foundation Guard (LFG), Terra’s official peg defenders, deployed over $2 billion in its newly formed bitcoin reserves.
May 25, 2022 · What's happening. The cryptocurrency market is in turmoil, exacerbated by the collapse of luna and the UST stablecoin, both tied to the terra blockchain.
May 14, 2022 · Amid the craziest week in crypto ever, the collapse of Terra's UST stablecoin and governance token LUNA emerged as the biggest story. Amid the crash, LUNA, formerly a top 10 coin by market cap, fell 100% to fraction of a fraction of a cent , and UST, designed to stay pegged at $1, bottomed out at 13 cents.
- Liam J. Kelly
- What Happened, exactly?
- Terra Dragged Down Bitcoin and The Whole Crypto Market
- Regulations Could Tighten
- Boundary-Pushing StableCoins Might Be Over
- Venture Capital May Stop Pouring Money Into Crypto
- The Hype Over Decentralized Finance May Be Slowing
- Ponzi Schemes Might Find Fewer Takers… Or Not
Terra’s rapid rise and fall can be difficult to explain succinctly without any prior knowledge of the blockchain. In fact, many of its boosters hid behind obfuscation and jargon to rebut some of its obvious flaws. Here’s a brief explanation. Terra is its own blockchain, just like Bitcoin or Ethereum. Its foremost product is the UST stablecoin, whic...
Before Terra’s crash, cryptocurrency values were already on the decline, due in part to the Federal Reserve raising its interest rates. (They did so to stop inflation, which has caused people to spend less money.) But UST’s crash put another dent in the overall market, most centrally because Terra creator Do Kwon had bought billions worth in Bitcoi...
Stablecoins have long been drawing the scrutiny of regulators. Congress held a hearing weighing their risks and benefits in December. The same month, President Biden’s working groupcalled for “urgent” action to regulate them. Terra’s crash gives even more ammo to regulators who argue that the space needs to be roped under government control. On May...
For many years now, ambitious blockchain developers have embarked upon the quest of creating a functional and safe algorithmic stablecoin, in the hopes that they might be more resistant to inflation than reserve-backed stablecoins and less susceptible to governmental oversight or seizure. But all of them eventually lost their peg and failed. UST, f...
Over the past couple years, an astonishing amount of money has flown into the crypto space via venture capital firms, perhaps most notably from Andreessen Horowitz. Terra itself was the beneficiaryof a slew of brand-name investors, including Pantera Capital and Delphi Digital. UST’s crash could raise mistrust on both sides. “It is likely that many ...
Much of the promise of crypto lies in its decentralized nature: that its value doesn’t derive from manipulable controlling authority like a bank or a government, but rather sleekly-designed code and network effects. This week, some crypto enthusiasts have argued that Terra’s crash was a successful stress test for this hypothesis: that Bitcoin’s per...
Whether the debacle sticks in people’s minds as a learning experience is another question entirely. On Thursday, the controversial crypto entrepreneur Justin Sun announced an algorithmic stablecoin with 40% APR for lenders. Galois Capital, in a snarky response, tweeted: “This industry being a self-regulating one requires that learning happen. The r...
May 12, 2022 · On Terra’s own blockchain, UST has a symbiotic relationship with its satellite asset luna, which can be used to earn cryptocurrency rewards.
Jiageng Liu, Igor Makarov & Antoinette Schoar. Terra, the third largest cryptocurrency ecosystem after Bitcoin and Ethereum, collapsed in three days in May 2022 and wiped out $50 billion in valuation.
