The Biggest Crypto Collapse, 300 Billion Dollars Evaporated In 72 Hours!

In May 2022, the crypto world experienced one of its biggest debacles with the spectacular collapse of Terra LUNA, wiping out over 40 billion dollars in value in just 24 hours. This disaster, which shook the entire ecosystem, will be etched in history as one of the biggest crashes in digital asset history.

A vertiginous fall with devastating consequences

On May 7, 2022, the Terra ecosystem, created by Do Kwon and Daniel Shin, was still dominating the crypto market from its offices in Singapore. Its algorithmic stablecoin UST, intended to maintain a perfect parity with the US dollar, had a market capitalization of 18 billion dollars, while the LUNA token peaked at 119 dollars.

The Anchor protocol, the cornerstone of the system, attracted investors with staggering returns of 20% per year on UST deposits.

But in the span of 48 hours, the unthinkable happened. A massive wave of withdrawals exceeding 2 billion dollars caused UST to falter, breaking its parity with the dollar. This initial crack triggered a catastrophic domino effect: the more UST dropped, the more the algorithmic mechanism created new LUNA tokens, driving their value towards zero.

The desperate attempt by the Terra Foundation Guard to deploy its Bitcoin reserves to stabilize the system proved futile. In less than 72 hours, LUNA and UST collapsed, obliterating the savings of thousands of investors.

A crypto earthquake with lasting repercussions

The shockwave from this disaster quickly spread beyond the borders of the Terra ecosystem. Major industry players like Celsius, Voyager, and Three Arrows Capital successively declared bankruptcy, victims of their exposure to the disaster. The total market capitalization of the crypto market thus plummeted by over 300 billion dollars.

For Do Kwon, the architect of this debacle, the fall was as brutal as it was spectacular. After fleeing South Korea, he was arrested in Montenegro in March 2023 with false documents. South Korean and American authorities are now disputing his extradition, accusing him of massive fraud and market manipulation.

His attempt to revive with Terra 2.0 only intensified investor distrust, already burned by his false statements and the mysterious transfer of 40,000 bitcoins to unidentified wallets.

In summary, the collapse of Terra LUNA will remain a brutal warning about the dangers of overly complex financial systems and unrealistic return promises. This catastrophe has forced the crypto industry to reconsider itself, pushing for more transparency and regulation.

In an ever-evolving market, this debacle reminds us that behind technological innovations and promises of easy gains, economic fundamentals ultimately prevail. Crypto finance will have to learn lessons from this to rebuild on stronger foundations.