The cryptocurrency sector has experienced a lot of dark days in its history, but very few can match the events of the past week. The Terra fiasco sent shockwaves across the financial world as its UST stablecoin and LUNA governance token swiftly careened to zero.
On Friday, Terraform Labs CEO and co-founder Do Kwon took to Twitter to express his sadness about how things have turned out for the Layer 1 blockchain. LUNA plowed higher following Kwon’s comments.
Do Kwon Distressed About UST’s Traumatic Week
Until a little over a week ago, Terra was one of the hottest things in the crypto world. At the time, LUNA was a top performer and among the top 10 most-valued cryptocurrencies by market cap, and its flagship algorithmic stablecoin UST was the third-largest.
And then, boom! They both crashed to unprecedented levels. The disaster came after UST, which is pegged to the price of one dollar, death-spiraled following heavy selling pressure. The Terraform Labs team has taken several steps to restore the peg in recent days. On Friday, Do Kwon proposed a plan to “revive” the Terra ecosystem. While acknowledging that the UST stablecoin as it stands is irredeemable, Kwon suggested resetting the distribution of the network’s ownership to LUNA holders through 1 billion new tokens.
As the team drilled to restart the entire Terra blockchain without UST, Kwon is “heartbroken” about the pain his inventions have caused. He revealed in a Saturday tweet that he has spent the last couple of days on the phone with those “that have been devastated by UST de-pegging”.
Suffice it to say, a lot of investors suffered significant losses from Terra’s debacle. While he doesn’t give details of his own losses, Kwon clarified that “neither I nor any institutions that I am affiliated with profited in any way from this incident. I sold no LUNA nor UST during the crisis.”
Over 80,000 BTC Sold For UST
Many projects in the past have collapsed, but never in such stunning fashion as Terra.
Meanwhile, Terra has documented how the bitcoin reserves of the Luna Foundation Guard were utilized during the de-pegging crisis.
According to the LFG, when the price of TerraUSD (UST) began to drop substantially below one dollar, the Foundation began converting its over 80,394 BTC reserve to $UST.
8/ As of now, the Foundation’s remaining reserves consist of the following assets:
· 313 $BTC
· 39,914 $BNB
· 1,973,554 $AVAX
· 1,847,079,725 $UST
· 222,713,007 $LUNA (of which 221,021,746 is currently staked with validators)
— LFG | Luna Foundation Guard (@LFG_org) May 16, 2022
LFG now holds circa 313 BTC. The Foundation says it’s now looking to use its remaining assets to compensate users of $UST, starting with the smallest holders.
On Saturday, though, LUNA’s freefall appeared to have sniffed the bottom. The volatile token rocketed to $0.00040154, representing a whopping 720% jump within 24 hours. LUNA’s trading volume also soared 1000% to $7.4 billion, soon after Terra restarted its block production following a 9-hour halt.
At this point, it’s unclear whether or not the Terra community can completely recover from such a huge loss. While the recent bounce gives frustrated investors momentary ease, it remains to be seen whether it will advance to a fully-fledged recovery.