Terra Luna Collapse

2022

Date: 9-13 May 2022 · Place: Terra blockchain · Anchor Protocol · global exchanges · Figures: Do Kwon, Terraform Labs founder · Anchor Protocol depositors · UST holders · Tags: Algorithmic Stablecoin, Black Swan, Do Kwon 01. $60B Erased In Four Days Between 9 and 13 May 2022 the Terra ecosystem collapses. UST, the algorithmic stablecoin, breaks its dollar peg on 9 May. The recursive mint-and-burn mechanism that backs UST with LUNA triggers hyperinflation in LUNA. LUNA goes from $80 to $0.0001 in 72 hours. Roughly $60B in market value is erased. Anchor Protocol had been advertising a 19.5% yield on UST deposits. South Korean retail, in particular, is wiped out. The TerraLabs founder Do Kwon, who in March 2022 had named his daughter Luna, watches in real time from Singapore. 02. The First Domino Luna takes Three Arrows Capital with it by June, Celsius and Voyager by July, FTX by November. The reflexivity that the bull market called genius is, in reverse, a chain liquidation. Lunatics, the holder nickname, becomes a slur within a week. Do Kwon is arrested in Montenegro in March 2023 carrying forged documents. The single phrase do kwon takes on operatic meme weight for 18 months: failed messiah, anchor bagholder, dad to a child whose name is now a tombstone. "By my invention, I shall remove the soul of money." — Do Kwon, Twitter, March 2022 (deleted) Sources • Terra Research Forum, post-mortem (May 2022) • Bloomberg, 'Anatomy of a Stablecoin Collapse' (May 2022) • US District Court, SDNY, SEC v. Terraform Labs and Do Kwon (filed February 2023)