crypto
Terra and LUNA
terra.money | Shut down May 13, 2022
An algorithmic stablecoin that de-pegged and wiped out tens of billions in days.
What it did
Terra ran the UST algorithmic stablecoin, held near one dollar by a mint-and-burn mechanism with its LUNA token, and paid roughly twenty percent yield through the Anchor protocol.
The facts, as reported
In May 2022, UST lost its dollar peg and the LUNA supply hyperinflated as the mechanism tried to defend it. Both collapsed to near zero within a week, erasing tens of billions in value and triggering failures across crypto lenders and funds.
- Terra blockchain (Wikipedia)
reporting | 5/13/2022
"UST lost its dollar peg in May 2022 and LUNA collapsed to near zero within days."
Marketur analysis, not fact
The yield was the product and the yield was the tell. A mechanism that only works while confidence holds is not a mechanism, it is a queue. Everything downstream that treated UST as safe collateral inherited the failure.
What to take from it
- If the return has no source you can name, you are the source.
- Reflexive systems work perfectly until the first real test.
- Anything that depends on confidence fails all at once, not gradually.
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