Terra Luna and UST armageddon, the sad faith of the Terra Ecosystem

LUNA has now lost almost 100 percent of its market value, while UST after hitting a low of $0.17 seems hard to be approaching the peg threshold again. The road however for the entire Terra ecosystem is still a long way off, and the entire market is totally shaken by this affair.

There is still a stir among investors and a lot of doubts and perplexity. There are many questions circulating and very few clear answers available. Is it possible that the structure of a fallacious system collapsed from one moment to the next without arousing any suspicion? Who started all this? Will the project that seemed so ambitious ever have a chance to catch up?

The Terra Ecosystem After the Armageddon

How LUNA could be wiped out in a single day?

According to some rumors, the intentions of the attack were purely malicious, putting real market manipulation into play.

From what seems to transpire, BlackRock and Citadel would first borrow 100,000 BTC from the Gemini platform and then trade 25,000 BTC in UST. When the time was right, they contacted Do Kwon, the co-founder of Terra, telling him that they were willing to sell a large amount of BTC in exchange for UST at a discounted price.

By agreeing, Do Kwon drastically reduced the amount of UST liquidity in the market. At that point, BlackRock and Citadel began offloading all remaining UST and BTC, triggering a cascade of sales on both assets.

But here comes the drammatic part as both investment firms knew that Anchor was nothing more than a big Ponzi scheme, fueled by promises of high APYs at 20 percent. As a result, this sudden market crash would have triggered more withdrawals than the protocol could repay. In fact, according to Forbes, more than $5 billion of UST would have been withdrawn from the platform, about a third of the entire market capitalization of the algorithmic stablecoin.

According to some rumors, the intentions of the attack were purely malicious, putting real market manipulation into play.

From what seems to transpire, BlackRock and Citadel would first borrow 100,000 BTC from the Gemini platform and then trade 25,000 BTC in UST. When the time was right, they contacted Do Kwon, the co-founder of Terra, telling him that they were willing to sell a large amount of BTC in exchange for UST at a discounted price.

By agreeing, Do Kwon drastically reduced the amount of UST liquidity in the market. At that point, BlackRock and Citadel began offloading all remaining UST and BTC, triggering a cascade of sales on both assets.

But here comes the dramatic part as both investment firms knew that Anchor was nothing more than a big Ponzi scheme, fueled by promises of high APYs at 20 percent. As a result, this sudden market crash would have triggered more withdrawals than the protocol could repay. In fact, according to Forbes, more than $5 billion of UST would have been withdrawn from the platform, about a third of the entire market capitalization of the algorithmic stablecoin.