Terra Luna Collapse (2022) event
Overview
The Terra blockchain ecosystem suffered a catastrophic failure in May 2022. Its algorithmic stablecoin, TerraUSD (UST), lost its dollar peg on 7 May 2022. The stablecoin's mechanism relied on minting LUNA tokens to defend the peg, rather than holding a reserve of fiat or other assets. This triggered a redemption spiral that massively inflated the supply of LUNA. The token's price had exceeded $116 in April; by 9 May it had dropped below $30, by 11 May it was under $1, and by 13 May it had fallen to essentially zero. UST itself bottomed at approximately $0.10 before stabilising near $0.02, representing a loss of roughly 98% for its holders. The Luna Foundation Guard deployed approximately $1.5 billion of capital on 8 May in an unsuccessful attempt to restore the peg. The total value destroyed in the collapse exceeded $40 billion. Do Kwon, the project's co-founder, was later sentenced to 15 years in prison.
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Questions on the record
Were any measures taken to support the peg?
On 8 May 2022, the Luna Foundation Guard deployed approximately $1.5 billion of capital to provide liquidity, and Do Kwon publicly advised holders to remain patient. Those efforts did not succeed.