The recent Luna crypto crash has shocked many, and this question still remains unanswered. What actually happened to Luna? How did it crash, and why did this happen? If you, too, are confused with questions like these, then tighten your seat belts because we will answer this question for you in today’s article. So without wasting any further time, let’s get straight into the details.

What Happened To Luna?

The world of crypto is volatile, and anything is expected here. In early May 2022, Terra Luna and Terra UST crashed spectacularly. The total worth of Luna had reached a high of $40 billion, and then it crashed to literally $0. Luna couldn’t escape the death spiral of the crypto market and wiped out almost $45 billion. This luna crypto crash left many astounded.

How Did This Happen Actually?

First, you need to understand that Terra Luna and Terra UST are sister currencies, and both are stablecoins. Just like when one person feels ill, the whole family is affected. Similarly, the crash of Terra UST led to the Luna crypto crash. Although many people believe that the recklessness of the founder of Luna led to its decline, here’s what actually happened.

1.    An Anonymous Purchase

All this started when an anonymous person bought a considerable amount of UST stablecoins worth more than $1 billion.

2.    The Shortage in Bitcoin Holdings

This purchase led to the shortening in the Bitcoin holdings of the Terraform labs.

3.    Some Huge Withdrawals

Out of nowhere, massive withdrawals were made on the Terra Network. These withdrawals were made through a decentralized finance protocol called Anchor.

4.    The Drop-In The Deposits

The sudden withdrawals put a load on the currency, and the deposits of Terra dropped by almost $3 billion. All this happened in just one week.

5.    Fear Controlled Actions

A $3 billion loss wasn’t something not to worry about, so the investors panicked and pulled their money out.

6.    UST Crashed

When most investors withdrew their amounts from the platform, the stablecoin couldn’t remain stable anymore and dropped down.

7.    Luna Crash

There was no way Luna could make out of this fussy scenario, and the sister coin crash eventually resulted in the Luna crypto crash.

Luna Price Prediction

After the Luna crypto crash, many people have been worried about the fate of Terra Luna and its price. So here’s our Luna price prediction for you. Will Luna return to its previous value somehow? The only way for Terra Luna to go to a pre-crash state is to burn large amounts of its supply.

The Terraform labs believe that all this is a part of the recovery plan, but Luna isn’t showing any major signs of recovery yet. It might not even be possible to burn such large amounts of supply. Yet, we now know how unstable these stablecoins are actually.

Final Thoughts

Do Kwon, the CEO of Terraform Labs, is still trying to find his way out of this crisis. Stablecoins are supposed to have only minor fluctuations in their values. But, this massive Luna crypto crash has shaken the entire crypto market. Let’s see what the time has in the pocket for us next!