The LUNA token was a month back, commemorating a brand-new ATH of $11918 Today, at the time of composing, it deserves $0.00000843 where all exchanges suspended trading in LUNA. The Terra blockchain has now stopped. A severe fall from grace.
So, what did occur? How can the LUNA rate go to nearly 0? Crypto Twitter Defi scientist Route 2 FI had a thread with a timeline and descriptions. Let’s discover what was going on.
The Terra blockchain has formally stopped at block 7607789.
Terra Validators have stopped the network to come up with a strategy to reconstitute it.
More updates to come.
— Terra Powered by LUNA (@terra_money) May 13, 2022
What Happened Beforehand?
People like Route 2 FI think that this was a collaborated attack versus UST and the Terra community. Before this attack might play out, there are 4 elements that you require to think about:
- The individuals behind this attack obtained a grand overall of 100,000 BTC from the Gemini exchange. They short these BTC.
- The next action is that they make an OTC (nonprescription) offer of $1 billion UST.
- The Luna Foundation Guard (LFG) currently purchased BTC throughout March and April. This is a defense reaction that exists to secure the peg.
- Curve reveals a switch from a 3-pool to a 4-pool. The 3-pool includes DAI, USDC, and USDT. The 4-pool includes UST and FRAX as decentralized steady coins. There are likewise USDC and USDT as central stablecoins in it.
What Started All This?
This all began with a substantial sell-off on Curve. As an outcome, the 3-pool was somewhat out of balance. The factor was a UST-to-USDC swap of $85 million. This begins to make the rounds on Twitter rather promptly. This leads to a $2 billion UST withdrawal on Anchor. In the meantime, the peg relocations in between 0.987 -0.995 That very first protective action achieved success, although the peg never entirely recuperated.
To get ready for the brand-new 4-pool on Curve, the LFG eliminates $150 million UST from the 3-pool. At that extremely minute, the assailants utilize the OTC purchased UST and drain pipes of the swimming pool for $350 million. The curve is now out of liquidity. This leads to the peg transferring to 0.97 -0.98
Now panic begins to embed in. Reports on Twitter start spreading out quickly. This causes huge tanking on the Anchor procedure. Deposits drop to around $10 million per minute. The peg is still at 0.97 and whatever appears to be in movement. Panic is all around, the Nasdaq is down, and likewise is the stock exchange. BTC, altcoins, and LUNA are all dropping.
What took place to $ UST and $ LUNA?
A long thread that takes a look at what took place in the last 4 days
— Route 2 FI (@Route2FI) May 12, 2022
What Happens Next?
Finally, the next action is that assaulters offer $650 MUST on Binance. This leads to a big de-peg. Learn more about the UST de-peg in our short article. Now the LFG begins to act, and they begin selling BTC and purchasing UST, to bring back the peg.
Also, this is precisely where the death spiral begins.
- The opponents discard UST.
- LFG keeps offering BTC and purchasing UST, to bring back the peg.
- The BTC drops since of high sell pressure.
- Anchor deposits decrease since individuals desire out. This produces a high sell pressure on the UST and it de-pegs a lot more.
As an outcome, this causes the LUNA rate to collapse out of worry about how LUNA/UST works.
This continues, which’s how the LUNA rate is where it is at today. At $0.00000843