LUNA meltdown sparks theories and told-you-sos from crypto community

Blockchain

LUNA meltdown sparks theories and told-you-sos from crypto community

Some of you saw it coming, some of you still can’t believe it’s real. Was the “most significant collapse in crypto history” an attack?

No matter how bad your day is going, spare a thought for LUNA investors on Wednesday. Terraform Labs, headed by CEO Do Kwon — No. 18 on Cointelegraph’s Top 100 — has lost billions of dollars for its investors.

Terra’s coins came crashing down as Kwon’s brainchild LUNA sunk over 97% from highs, while the stablecoin TerraUSD (UST) fell 75% lower than its intended dollar parity.  At one point, LUNA’s price tread lower than UST.

There are real consequences to the coins’ failures. On the r/Terraluna subreddit, suicide hotlines have been pinned. The subreddit is indeed a disturbing read as the LUNA crisis unfurls.

So, how did it happen? How did an ecosystem led by a braggadocious personality experience one of crypto’s biggest crashes?

What was initially considered a FUD (fear, uncertainty and doubt) attack on Luna has evolved into something far more conspiratorial and insidious. Among the most popular theories is an alleged George Soros-inspired “attack” on the Terra ecosystem, in which the buyer made off with over $800 million.

Ransu Salovaara, CEO at Likvidi, echoed the theory, explaining to Cointelegraph that “Some parties picked UST’s algorithm peg as a market manipulation target and borrowed lots of Bitcoin to execute this, what some call ‘Soros style,’ attack on UST.”

The “attack” caught mainstream attention, with United States Treasury Secretary  Janet Yellen bringing up algorithmic stablecoins on Tuesday and highlighting the “risk” they pose during a Senate Banking Committee meeting. Economist Frances Coppola concurred that the UST debacle was an attack.

Ran NeuNer, host of CNBC’s Crypto Trader and a “good friend” of Kwon, sent the rumor mill into hyperdrive with his suggestion that American market maker Citadel could be behind the “attack.” Charles Hoskinson, CEO of IOHK, also said the “word on the street” is that it may be Citadel. 

While billionaire Citadel Securities founder Ken Griffin has laid bare his dislike for the crypto industry— comparing the trillion-dollar market to abstract art — the suggestion that Citadel would attack UST remains speculation. Inevitably, Crypto Twitter accused Neuner of trying to protect his significant yet fast-evaporating LUNA bags.

Meanwhile, Larry Cermack, a crypto researcher, suggested that over $1 billion is inbound to shore up and fight the Luna Foundation Guard wildfire. According to Cermack, venture capital would be provided by Celsius, Jump and Alameda, among others.

Theories aside, for many crypto observers, researchers and believers, the UST car crash was a) foreseeable and b) one of the most significant crypto deaths in history.

For Tree of Alpha, the white-hat hacker who discovered a crisis-level flaw in the Coinbase API, LUNA’s demise is “by far, the biggest Ponzi death spiral collapse in the history of Crypto, by a factor of 16.” Nic Carter of Castle Ventures made the same call, describing it as “the most significant collapse in the history of the crypto space.”

Tree of Alpha compared LUNA to the confirmed Ponzi scheme Bitconnect, a $2.4 billion fraud case involving highly memed frontman Carlos Matos that went down in crypto infamy.

Cory Klippsten, CEO of Swan Bitcoin, who had been banging the Bitcoin maximalist drum (i.e, avoid shitcoins at all costs) since the inception of UST, quickly memed “BitKwonnect” into existence.

Lyn Alden, No. 100 on Cointelegraph’s Top 100, had also previously warned of UST’s lurking issues. In an investor letter, Alden described the accompanying Bitcoin “selling pressure” that would flood the market with tens of thousands of coins if the UST peg crumbled. She was right: All of the events she mentions occurred over the past 48 hours.

Perhaps the ultimate slam dunk “I did warn you!” was from John Carvalho, CEO of Synonym, who suggested that UST felt like “a huge trap.” He chided followers against UST in March 2022:

Citadel’s managing director David Millar provided the following statement to Cointelegraph following the publication of this story: “Citadel Securities does not trade stablecoins, including UST.”

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