Luna Currency Fell By More Than 99% And Rose By 11562%. The Exchange Was In A Hurry To "unplug The Internet Cable"

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A terrible cliff collapse caused a great storm in the virtual money market. Luna's "halo of fortune" was the protagonist of this event. In its glory, Luna currency once ranked 10th in the market value of virtual currency. However, from May 9 to May 11, its price almost returned to zero, plummeted by more than 99%, and indirectly collapsed the whole virtual money market.

Boosted by this news, Luna currency then rose rapidly, soaring by more than 11562%. As of 11:00 on the 14th Beijing time, the currency price was US $0.0001.

"Coin circle Maotai" flash collapse

On May 13, Beijing time, "on the virtual currency trading interface, dozens of currencies are all red, especially dazzling." Arvin (a pseudonym) closed the trading software, "I feel hot eyes when I look more. I don't want to touch it again."

According to coinmarketcap data, Luna coins reached an all-time high of $119.5 on April 5, with a maximum market value of $41 billion (about 278.6 billion yuan). However, since May 9, the price of Luna currency has been falling, and the price of Luna currency has almost returned to zero.

Driven by the sudden collapse of Luna currency, cryptocurrencies including bitcoin and Ethereum also experienced a bloodbath. Bitcoin broke the integer of $30000 three times this week, once falling below the $27000 mark, hitting a new low this year.

On the evening of May 12, hod (a pseudonym) didn't fall asleep and his mind was full of money that had disappeared. Previously, he tried to persuade his wife to invest four fifths of his total savings of $1.2 million in the virtual currency Luna currency. At present, he has lost 98%, which is equivalent to about 6 million yuan at the latest exchange rate.

In addition, more than 100000 people have sold out. According to currency sector data, as of 11:00 on the 14th Beijing time, more than 160000 users broke their positions within 24 hours, with a value of 2.12 billion yuan.

"It took me a few years to earn $1 million from $100000. I only spent an hour losing $1 million. The currency circle has been surging these two days. I have nothing to say because I broke my position." Hualu (pseudonym) is an "old driver" who entered the coin circle in 2017 and has experienced many major retreats, but this one million level retreat may make him silent for a long time.

"I always believed that Luna would return to zero, so when Luna rebounded from US $0.50 to US $1.50, I added an empty order, plus some hedged Luna. The total position opened to 400000 Lunas, and then everything burst when it rebounded to US $4. After the position burst, I quickly put in money and borrowed money everywhere. Maybe I didn't understand the contract thoroughly enough, and it kept adding margin to me, just that almost all my money was in it. Look at the price It keeps getting higher, but I can't stop the loss. I keep shouting in my heart that Luna will return to $1. It did go back, only after I broke out. " Flower dew said.

Since May 13, the head virtual currency exchanges, such as coin an, upbit and bybit, have successively issued announcements of taking off the shelf and suspending the recharge and withdrawal of Terra (LUNA) network. Coinbase exchange even directly warned investors that they might lose their money.

Stable currency instability

Luna coin and ust coin are algorithmic stable coins of decentralized financial agreement Terra. Luna currency is used to stabilize the issuance of currency, price stabilization mechanism and network governance. So why did it suddenly collapse?

This should start with the concept of "stable currency".

The price of most virtual currencies is volatile, such as bitcoin. This also makes the virtual currency unable to be used as a real "currency", and it is difficult to become a safe haven for investors. Therefore, a virtual currency with stable price has been designed.

There are many kinds of stable currencies on the market: one is the stable currency supported by legal currency, which means that there is 1:1 equal support of US dollars in the bank account of the United States, such as usdt; The other is a stable currency supported by very unstable assets, that is, algorithmic stable currency. If the bottom layer collapses, the currency price may fall sharply, such as UST.

At the beginning of ust issuance, try to ensure that the currency price does not fluctuate, that is, 1ust is equal to US $1. The way of guarantee is to issue Luna coins at the same time as ust as the "intermediary" between ust and US dollars. People exchange US dollars for Luna coins and then Luna coins for UST. The issuance of Luna coins is automatically calculated by the code and determined according to the price of UST. Luna currency absorbs the volatility of UST, so ust can be linked to the US dollar. This absorption is realized through arbitrage.

"When the UST price is higher than US $1, the user can send us $1 worth of Luna coins to the system (Luna coins are destroyed) and exchange one ust (UST is minted). When the UST price falls below US $1, the user can send us (UST is destroyed) to the system in exchange for us $1 worth of Luna coins (Luna coins are minted) This will reduce the market supply of ust and restore the 1:1 anchoring relationship between ust and the US dollar. A few days ago, someone bought a large amount of ust and threw it out at one time, so the price of ust fell sharply. Because the UST price fell too seriously, according to the code operation, a huge amount of Luna coins were automatically issued, tens of millions of Luna coins at a time, which caught people off guard. " Insiders told reporters.

The above insiders pointed out that when the virtual money market encounters severe fluctuations, the stability mechanism of spontaneously regulating the relationship between supply and demand through the market will fail, and large-scale liquidation events may occur, further collapse ust credit, and then fall into the "death spiral".

Affected by the sharp decline of Luna, the lowest stable currency ust linked to Luna fell below US $0.21, which is in a state of serious decoupling from the US dollar, which is far from its attribute of "stable currency". It is understood that ust is the third largest stable currency in the cryptocurrency market, and its price has always fluctuated around us $1 before.

The wealth of the big money circle has shrunk

Because of the collapse of the virtual money market, the wealth of the money circle leaders has also shrunk.

According to the Bloomberg billionaire index, coinbase founder Brian Armstrong's wealth has evaporated by about 83% to the current $2.3 billion.

Zhao CHANGPENG, founder of the currency security exchange, suffered even greater losses. According to the Bloomberg billionaire index in January, Zhao CHANGPENG's personal wealth was $96 billion. As of May 14, this figure had been reduced to $18 billion, evaporating $78 billion (about 530 billion yuan).

In addition to individual investors, there are also countries that lose money in investing in virtual currencies.

In September 2021, El Salvador became the first government in the world to make bitcoin legal tender. According to El Salvador President naib bucker's statement on social media, since becoming the world's first government to make bitcoin legal tender last September, his government has spent about $105 million on bitcoin.

For the first time since the purchase of bitcoin, El Salvador has lost about US $40 million, which has reduced the value of bitcoin to about US $26 million.

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