Terra Luna's $40B Collapse

A story about how the Terra/Luna cryptocurrency project worth $40+ billion collapsed in 24 hours after its founder Do Kwon dismissed warnings about its vulnerability.

"Terra was this stablecoin project where they created two coins - a stablecoin meant to always be worth $1, and Luna which could go up and down in price as a stabilizing mechanism. The project got really big, reaching about $18 billion in total value.

Someone on Twitter specifically laid out a 15-step plan saying 'Hey look, I did the math - if somebody was motivated and had $1 billion, they could destroy Terra which is currently worth $40 billion.' Do Kwon, the founder, retweeted it saying 'This is the most retarded thing I've ever read on Twitter' and challenged billionaires following him to try it.

Sure enough, about two weeks later, somebody or some group started dumping $1 billion worth of the stablecoin. This caused the peg to drop below $1, down to 92 cents. They were also dumping Bitcoin which was the reserve collateral. People started panicking and withdrawing their money. You saw $3-4-5 billion of sales happening in a very short time.

The stablecoin went from $1 to about 15 cents, and Luna went from over $100 to less than a penny. About $48 billion in value was completely wiped out. This happened right when they were moving their liquidity from one pool to another, so there were less shock absorbers than usual to handle the selling pressure."