Terra's LUNA drops to $0.01, a 99%+ decline in 24 hours, down from $60 earlier this week and $120 in mid-April, after Terra's UST stablecoin lost its dollar peg
CoinDeskShaurya Malwa
Context & Ripple Effects
The endgame of a three-day unwind: UST first broke its dollar peg on May 10 even after the Luna Foundation Guard pledged $1.5B of bitcoin reserves to defend it [[a:978718]], and by May 11 LUNA had already fallen as low as $1 in a ~97% daily slide [[a:978760]]. Terraform Labs then halted block production twice within 24 hours 'to come up with a plan to reconstitute' the network [[a:978852]].
LUNA at $0.01 — down from $120 in mid-April — is the terminal price discovery for an algorithmic stablecoin design whose seigniorage loop inverted: every attempt to restore UST's peg minted more LUNA and crushed it further. With ~152M tokens, roughly 30% of circulating supply, staked and locked for weeks per Terra Analytics, most holders could not exit at any price.
First-order effects
Holders are effectively wiped out at $0.01, and the ~30% of supply that is staked cannot exit for weeks — losses are locked in rather than realized on the way down.
Terraform Labs has lost control of its own chain's economics, forcing repeated validator halts while it searches for a reconstitution plan.
Second-order effects
Exchanges and market makers absorb the fallout of a top-asset going to near-zero in days, and the rebooted chain's freshly minted LUNA later opened and slid ~70% from its opening price — a second round of losses for buyers of the recovery [[a:979353]].
Every other algorithmic or undercollateralized stablecoin now faces redemption pressure and scrutiny, as UST's failure becomes the reference case regulators and counterparties cite against the whole category.
Third-order effects
If the pattern holds, stablecoin regulation shifts from hypothetical to concrete, with algorithmic designs treated as structurally distinct from fully reserved ones — and capital consolidating toward collateralized issuers that can survive a run.
The collapse demonstrates that on-chain staking locks, meant to secure networks, become exit traps during death spirals — pushing protocol designers toward liquid staking and faster unbonding as a systemic-safety feature.
The trend: Algorithmic stablecoins are being repriced from yield engines to tail-risk liabilities, with UST's death spiral accelerating the migration of trust toward fully reserved designs and regulatory scrutiny.
Tis bit fucked tbh. Their plan is to let hyperinflation of Luna dissolve the bad UST debt, but the chain security of Luna goes down as hyperinflation reduces its price. So the chain is not even safe enough to continue their plan for recovery?
When crypto falls from $1 to 1 cent in a day, the media are quick to naysay: “crypto crashes 99%!” And yet, next day, when it doubles to two cents, you won't see “crypto up by 100% today!” Appalling bias.
Market carnage, this is my personal read: - $USDT will be back at $1 before long. Tether truthers will bang on about this ‘depeg’ for weeks. - Realized losses 2nd heaviest in history, looks like capitulation - #Bitcoin basically kissed the realized price ($24k). $BTC is cheap htt…
Genuinely impossible to feel sorry for crypto enthusiasts getting wiped out when they showed nothing but extreme ideological hostility for the idea of securities regulation that was designed to protect them from these outcomes.
$LUNA supply is unlimited guys. It will trend asymptotically towards 0 but never hit 0 $100, $10, $1, $0.10, $0.01, $0.001, $0.0001 and so on, until the peg is regained or liquidity is 0. Don't buy at $0.01 thinking it will go back to $10. You're getting hyperinflated
The positive I'm pulling from this $LUNA $UST spiral is that Tendermint consensus proved itself. No longer can people say “well let's see it hold up against ETH levels of daily transactions”. It did it, over 1 Million daily transactions & still cheap fees/ fast finalization.