Terraform Labs CEO and co-founder Do Kwon [has been arrested in Montenegro](/news/article/do-kwon-hiding-in-serbia). He oversaw the multi-billion dollar collapse of the TerraUSD-LUNA ecosystem and has been [charged with fraud](/news/article/terraform-labs-accused-of-fraud-by-sec) by US prosecutors.

## Do Kwon arrested: Series of events

In early 2023, Do Kwon and Terraform Labs [were accused of](/news/article/do-kwon-red-notice) "orchestrating a multi-billion dollar crypto asset securities fraud", with eight charges announced against him by US prosecutors.

He was arrested on 23 March in Montenegro, travelling under a false name and in possession of fake documents. South Korean authorities released a separate arrest warrant for him in September 2022. They were at the scene to confirm his identity through official fingerprint records.

## Do Kwon arrested: Why did the TerraUSD-LUNA ecosystem collapse?

The Terra ecosystem was created in 2018 by Terraform Labs and is largely known for its decentralised algorithmic stablecoin, TerraUSD (USD), and reserve asset cryptocurrency, Luna (LUNA). The (now defunct) algorithmic stablecoin system is simple to understand:

•	1 UST = $1 LUNA.

•	If UST<$1, burn UST and mint LUNA. Burning will raise UST's price.

•	If UST>$1, burn LUNA and mint UST. Minting will decrease UST's price.

What [made this system a Ponzi scheme](/news/article/terra-luna-collapse) was the unsustainable interest rate of nearly 20% offered upon staking UST on the Anchor Protocol.

## The system was built to fail.

Upon shifting from a fixed interest model to a dynamic one, UST began its downfall on 7 May, 2022, when a UST whale sold an enormous amount of the stablecoin.

To compensate for the de-pegging of UST, mass burning of the stablecoin began, leading to a surplus of LUNA on the open market. Both cryptocurrencies collapsed and more than $40B in UST-LUNA market value was wiped out. Even a $3.5B Bitcoin reserve fund failed to control the downslide of the value of both crypto tokens.

In a nutshell, the model was based on minting an endless supply of LUNA to maintain UST at $1 and keep investors happy with an unsustainable interest rate model.

It should be noted that Do Kwon and the algorithmic stablecoin system were called out by a renowned economist Frances Coppola well before all this unravelled. Do Kwon mocked her publicly.

![dokwon.png](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/dokwon_f0af2d76e8.png)
 
Source: [Twitter (@stablekwon)](https://twitter.com/stablekwon/status/1410491186196795398?s=20)

I hope that [Do Kwon’s arrest is one step](/news/article/do-kwon-terra) towards a safer and better crypto space for all.


do kwon beind bars in montenegro with red filter

Terraform Labs CEO Do Kwon Arrested

Before we examine USDC vs USDT, we need to understand what stablecoins are and how they operate.

Every cryptocurrency token has a level of volatility, from Bitcoin to Shiba Inu. Cryptocurrencies are susceptible to both exhilarating price increases and sudden, precipitous declines in the same way that traditional assets are.

Stablecoins have emerged as a reliable method for investors to keep their money in the cryptocurrency ecosystem despite the wild price swings that have been occurring recently.

Stablecoins, coins pegged to a real-world asset, most commonly a fiat currency, offer protection against the price volatility to which other coins are prone. Both USD Coin (USDC) and Tether (USDT), pegged to the US dollar, have emerged as the most prominent stablecoins.

They have maintained their position at the forefront of the market and can be found in the most important cryptocurrency exchanges, wallets, and applications. It is helpful to have an understanding of how each stablecoin operates before making a decision regarding which one is the most suitable for your requirements.

#What are stablecoins

A cryptocurrency whose value is backed by an external asset, such as the US dollar, is known as a stablecoin. For a significant portion of their early existence, Bitcoin and other early cryptocurrencies could only be traded for other cryptos or traditional currencies.

If you wanted to trade your coins for something else, there was no mechanism for holders of cryptocurrencies to switch to a fiat-backed asset without first leaving the ecosystem of cryptocurrencies entirely. Stablecoins are what made this possible in the first place. 

Stablecoins [are utilized by many crypto traders](https://www.moonpay.com/learn/cryptocurrency/what-is-the-difference-between-usdt-and-usdc) so that they may continue to participate in the ecosystem by keeping an asset that maintains its value. You may swap them whenever you want, 24 hours a day, without going to your bank to withdraw cash first.

Bitcoin was designed to be less volatile than other digital currencies. As long as the backing ratio is accurate, the value of these tokens will never change and will always remain the same.

#Why are so many stablecoins pegged to the USD?

The most widely used stablecoins in circulation today are USDT and USDC, with market capitalizations in the multi-billion dollar range. However, they are not the only ones doing this.

Binance has its stablecoin, known as BUSD, and Dai, also known as DAI, is a cryptocurrency built on Ethereum and developed to operate only on those networks. Both of these coins will always be worth $1, just like USDC vs USDT, but it does not mean they are interchangeable. The coin you choose to buy will depend on the blockchain and applications with which you intend to engage.

In 2014, Tether Limited of Hong Kong became the first company to produce USDT to bridge the gap between cryptocurrencies and fiat currencies. Tether provided users with access, for the very first time, to a platform-agnostic, blockchain-based US dollar that held many of the technical advantages of Bitcoin, Ethereum, and other crypto assets, including their high liquidity but none of their volatility.

This was made possible by Tether's use of the Ethereum blockchain. Tether has built a permissionless mechanism to send crypto-dollars to anyone with speed, transparency, and a low cost. This opens up the use case of cryptocurrencies to include remittances, payments, and more. Tether has accomplished this by tapping into the best of both worlds.

As soon as it was made available to the public, hundreds of cryptocurrency trading pairs began listing against USDT, providing the token with an early mover advantage in the market for stablecoins. There are 74.7 billion USDT tokens circulating across the most important blockchains, including Bitcoin, Ethereum, EOS, Algorand, Tron, and many more.

It is possible to buy or trade for hundreds of different cryptocurrencies using USDT on cryptocurrency exchanges, making it the most popular trading pair in the crypto market. Anyone can use USDT to conduct transactions that are not only inexpensive but also speedy, and they can earn interest on decentralized financial protocols.

It also provides a method for businesses to accept cryptocurrency payments denominated in fiat money, allowing them to do so without assuming the market risk typically associated with accepting payments in the form of more volatile cryptocurrencies.

USDT has maintained a position among the top five cryptocurrencies regarding market capitalization and trade volume, frequently surpassing the daily trades conducted in Bitcoin.

## Stability of the USDC vs USDT

Because of how USDT was developed, its dollar value will almost always remain constant at $1. Although there is a remote possibility that the price could shift by a few cents here and there, the market tends to quickly correct itself to back to its original $1 price point.

Coinbase and Circle collaborated in 2018 to create the stable cryptocurrency USDC. Its price, pegged at $1 and not adjusted, is the same as that of USDT and any other token backed by USD. The Centre Consortium oversees the technical and financial standards for the stablecoin and ensures transparency surrounding a true 1-to-1 backing.

The Centre Consortium is also in charge of the governance of the coin. This indicates that $1 and other cash equivalents are kept in reserve for every created USDC.

A supply of 34.6 billion USDC is circulating, while an equal monetary amount is held in reserve. To facilitate the expansion of the USDC ecosystem, Circle has made it possible for Circle's licensed and regulated financial institutions to become Circle members and issue USDC tokens. 
You may buy or trade USDC on [virtually all leading cryptocurrency exchanges and providers](/news/article/crypto-exchange-gemini-cuts-staff). Similar to USDT, USD Coin can be sent and received by any wallet or exchange compatible with the ERC-20 standard used by Ethereum.

USDC vs USDT: Understanding the Stablecoins

Crypto entrepreneur Do Kwon and the company he co-founded, Terraform Labs, have been [accused](https://www.sec.gov/news/press-release/2023-32) of fraudulent activities by the US Securities and Exchange Commission (SEC).

According to the SEC, Kwon and Terraform Labs offered and sold unregistered securities, including the TerraUSD stablecoin, and conducted a scheme that resulted in the loss of at least $40 billion worth of market value. The case is a significant step in the SEC's ongoing efforts to regulate the crypto industry.

The SEC's allegations include the assertion that Kwon and Terraform Labs misled investors by making false statements about their relationship with the South Korean mobile payment app "Chai" and the stability of the stablecoin TerraUSD, which was marketed as maintaining a 1-to-1 peg to the US dollar. The agency has also accused the company and Kwon of offering misleading investment opportunities to investors.

## SEC files complaint against Terraform for securities violations

The SEC has filed a [complaint](https://www.sec.gov/litigation/complaints/2023/comp-pr2023-32.pdf) in the US District Court for New York's Southern District against Terraform and its founder, Do Kwon, for alleged violations of the Securities Act and the Exchange Act.

The complaint, which spans 55 pages, claims that Terraform and Kwon were engaged in deceptive marketing practices concerning its Anchor Protocol, which advertised a 20% interest rate on deposits of USTC.

The SEC also alleges that the defendants misled investors about the stability of Terra's stablecoin, which lost its US dollar peg in May 2021, resulting in a collapse of the digital asset market that wiped out an estimated $40 billion in value.

South Korean authorities are searching for Kwon, whose current location remains unknown. He is [suspected to be in Serbia](/news/article/do-kwon-hiding-in-serbia) after departing from his residence in Singapore in September. This search is in relation to an arrest warrant issued in September on allegations including breaches of capital-markets law. Noticing the hide-and-run game, Interpol issued a [red notice](/news/article/do-kwon-red-notice) against him to locate his whereabouts.


Terraform Labs Accused of Fraud by SEC 

The Luna coin news latest reveals that Do Kwon, the founder of collapsed Luna and TerraUSD tokens, and his company Terraform Labs problems are far from over.

In Singapore, 350 investors impacted by the collapse of UST consequently issued a [lawsuit](https://s.wsj.net/public/resources/documents/221028-HCOC2472022-StatementofClaimdated23.09.2022.pdf) against Kwon seeking [$57 million](https://www.investing.com/news/cryptocurrency-news/do-kwon-faces-57-million-fraud-lawsuit-by-terrausd-investors-2926118) in compensation.

In South Korea, prosecutors have frozen assets worth $92 million affiliated with the Terra tokens. The seized assets were taken from Kernel Labs, a tech firm closely related to Terraform Labs.

South Korean authorities issued an arrest warrant for Do Kwon on charges including fraud and market manipulation. His location is still unknown.

## Luna coin's history

Before looking at the Luna coin news latest, let's take a look back. The coin’s history begins in 2019 when it was launched by Terraform Labs, a company founded by Do Kwon and Daniel Shin.

It was created to be the native token of the Terra blockchain. It had several use cases in the Terra network. Holders could use it as a method of payment and vote on network changes. It could also be staked for staking rewards.

It entered the crypto market worth $1.31. A year later, its value was still below $10. However, things would quickly take a turn for the better in 2021.

On 4 October, after the launch of the Columbus-5 Mainnet upgrade, it reached its first all-time high of $49.45. On 27 December, it recorded its highest value of the year, trading at $103.33 per coin.

It began 2022 on a high note reaching a new all-time high of $119.18 on 5 April. However, it would suffer a substantial loss on 6 May, dropping to trade at $82.94 per coin. By 13 May, it had fallen to trading at an all-time low of $0.00001675.

May marked the end of the cryptocurrency, once one of the most successful decentralized finance coins. It was a coin that had been ranked as the seventh largest cryptocurrency by market capitalization by Coinmarketcap.

## TerraUSD (UST)

[TerraUSD](/news/article/terra-usd) was a stablecoin operating on the Terra blockchain. Unlike other stablecoins, it was an algorithmic stablecoin that used LUNA coin to maintain its peg to the US dollar. It was not backed by an actual dollar, but by an algorithmic stablecoin.

UST coins were created by burning LUNA coins. They could also be swapped for LUNA. How the two coins worked was if the value of UST went above $1, the equivalent value of LUNA would be burnt, therefore minting more UST, making it less valuable. However, if the price of UST dropped below $1, they would be swapped for LUNA, making UST valuable. The two coins relied on each other for stability.

The relationship between the two cryptocurrencies had them both crashing when UST lost its peg to the US dollar.

## The market crash

On 7 May, 2022, more than $2 billion worth of UST was unstaked from the Anchor protocol, a decentralized money market built on the Terra blockchain. Hundreds of millions worth of the unstaked stablecoin was later quickly liquidated. This resulted in UST dropping in price from $1 to $0.91.

Once the huge amount of UST had been offloaded, the stablecoin started to depeg. Investors started to panic, and many of them sold off their UST, resulting in the minting of more LUNA coins, increasing its public circulation.

## After the crash

The UST crash had a devastating effect on the crypto market. The price of Bitcoin fell to $26,000, down 60% from its November 2021 peak. Ether, the second largest cryptocurrency, lost 30% of its value. Coinbase, one of the largest crypto exchanges, reported a loss of $430 million in its first quarter.

Do Kwon, the Chief Executive of Terraform Labs, tried to salvage the situation by proposing a burn of UST via a tweet on 11 May, 2022. The community passed the proposal, but the burning was not a success. It attempted to burn more UST than existed.

On 13 May, Do Kwon proposed another plan to create a new blockchain and leave behind the failed stablecoin. The community accepted the plan, resulting in a new blockchain and cryptocurrency called Terra 2.0 and Luna 2.0.

## LUNA 2.0

It is a new version of the old LUNA coin. It lives on the new Terra 2.0 blockchain and was created to compensate those who suffered heavy financial losses after the TerraUSD crash. It also provided a way for the Terra network to try and recover from the devastating market crash.

The token was released to the public on 28 May, 2022. It started trading at an impressive price of $18.98 and briefly spiked to $19.45 within the first hour of trading. However, by the end of May, it dropped to trading at $8.88. For the rest of the year, it traded between $2 and $1.

It began 2023 worth $1.26, and is currently trading at $2.09. According to [Coinmarketcap](https://coinmarketcap.com/currencies/terra-luna-v2/), it is the 93rd largest cryptocurrency by market cap, valued at $305,627,338. 

The coins have a max supply cap of a billion coins. There are currently 202,010,814 of them in public circulation. They have already been listed on several crypto exchanges for purchase, including Binance, KuCoin, and Crypto.com.

LUNA 2.0 differs from its predecessor in that it does not rely on any stablecoin, algorithmic or not, for stability.

## Luna Classic (LUNC)

[LUNC](/news/article/luna-classic-news-future) is the old Terra blockchain's native token. The blockchain is now called Terra Classic. The token maintains all the properties of the original Terra Luna coin.

After the hard fork, LUNC began trading at $0.0001206 per coin. By the end of May, it was worth $0.0001147. By mid-June, it dropped to trading at $0.00006177. Once in a while, it made some slight price appreciation but not enough to warrant attention. It ended 2022 worth $0.0001452.

It began 2023 worth $0.0001451. It is currently worth $0.0001852. According to [Coinmarketcap](https://coinmarketcap.com/currencies/terra-luna/), it is the 53rd largest cryptocurrency by market cap, valued at $1,107,506,959.

While many people may have lost faith in the cryptocurrency, it is still listed on several crypto exchanges for those who wish to invest in it. Some places to buy the cryptocurrency include Binance, Bybit, Deepcoin, OKX, and Bitrue. The coin has a max supply cap of more than six trillion.

## LUNA 2.0 and LUNC compared

So far, LUNC and LUNA 2.0 are doing pretty well price-wise. The coins are on a positive trajectory, and some investors are a little optimistic about them.

However, Luna coin news latest reveals that LUNC is doing much better than its new version. LUNC price performance has been doing well because of the recent burn.

The LUNC burn is a move that was passed by the coin’s community to try and save its ecosystem and restore its price.

The new Terra Classic blockchain where LUNC lives has a unique coin burn feature designed to reduce the circulating supply of LUNC tokens while increasing their value.

The LUNC burn mechanism automatically burns tokens whenever a transaction takes place on the Terra Classic network. Tokens burned are relative to the number of tokens in circulation, ensuring that the total supply of LUNC tokens is constantly decreasing, which helps with increasing their value over time.

Binance, one of the largest crypto exchanges, is also implementing the LUNC burn mechanism on trades facilitated by it. The exchange has committed to carrying out LUNC burns monthly. So far, the exchange has burned close to 14 billion LUNC tokens.

The Terra Classic community has burned more than 26 billion LUNC tokens. In the last two weeks, as of writing, the community has burned close to 20 million LUNC tokens. Unlike Binance, which executes the burns monthly, the Terra Classic community carries out the burns weekly.

The continued burn of LUNC tokens has not only increased the number of investors buying them but interest in them too. This is why their price has been surging. More than 40 billion LUNC tokens have been burned so far.

LUNC tokens also outshine the new version with a strong community. The token might have rebranded, but it still is supported by a strong community. Its large network of stakeholders continues to go to great lengths to keep it afloat and hopefully get it back to its former glory.

## LUNA 2.0's future

Since its launch, few people have been hopeful about the new Terra token. Several financial analysts have been quite vocal about its quick death and deterring investors from considering adding it to their crypto portfolio.

Founder and CEO of Quantum Economics Mati Greenspan, for example, when asked about the coin's future, stated that it was never meant to live long.

According to Greenspan, the coin was created for a few investors who had heavily invested in its collapsed version as a way to recover some of their losses at the expense of new money coming from the hype. He added that he didn’t see any reason for the coin’s price to ever go up.

Khaleelulla Baig, founder and CEO of Koinbasket, backed up Greenspan's statement by saying the coin had no future because its founder Do Kwon had lost credibility. The project had lost credibility because Do Kwon didn’t build firewalls around the algorithms even when they had an opportunity to do so.

The two are not the only ones who predicted a dismal future for LUNA 2.0 back in 2022. The cryptocurrency has been through a lot. It is obvious why many people would be wary of it and even predict its quick demise.

However, considering Luna coin news latest, it isn’t performing as badly as many thought it would be. Compared to other cryptocurrencies that have been around longer, it is doing considerably well. While its future is hard to predict, it is worth keeping an eye on.


green image of altcoins with LUNA token in the centre

LUNA Coin Latest News

The ill-famed Terra crash of May 2022 that tanked the price of LUNA from $86.16 to $0.00005524 overnight cast a dark cloud on the token's previously bright prospects. This article investigates the outcomes of the Terra community's LUNA Classic burn initiative.  

The LUNA Classic burn occasioned by Proposal 5234, which initiated a burning tax of 1.2% and later to 0.2% to increase the token's scarcity, is now the most talked about subject within the crypto community.

The burn, seen as an integral part of the Terra recovery plan, was the community's scheme to reduce the number of LUNA Classic (LUNC) coins in circulation to keep the Terra ecosystem alive. This is possibly one of the reasons the coin's market value has remained at number 47 in the [CoinMarketCap](https://coinmarketcap.com/) at the time of writing.        

## The reason behind the LUNA Classic burn 

The Terra crypto crash saw the supply of LUNA coins in circulation skyrocketing to over 6.5 trillion coins. The community initiated a Terra LUNA burn to try and reduce the supply and potentially increase its value. The token’s recovery plan launched [LUNA 2.0](/news/article/what-is-luna-2.0), meaning that while the LUNA burn would not necessarily save the ill-fated token, it would technically have the same effect in reducing the supply.

Crypto burning refers to removing tokens from circulation by sending them to a crypto address not controlled by anyone. This technical removal from the circulating supply of coins is expected to impact a token’s price action positively. The goal was to launch 1 billion LUNA to drive the token’s price toward $1.        

The new token taking over as LUNA 2.0’s main form, [Luna Classic](/news/article/terra-luna-classic) (LUNC), is driving the burning desire with LUNC holders hoping it will help push up the price. As the list of exchanges accepting LUNC increases, statistics indicate that the Terra Classic community recently burned more than 16 million LUNC tokens within a week, even as it aims to still burn billions more in 2023, having already burned over 37.717 billion LUNC tokens.

## How the LUNA crash affected the crypto market

The woes that led to the collapse of [LUNA cryptocurrency](/news/article/luna-crypto) can be traced back to TerraUSD (UST), the algorithmic stablecoin supported by the Terra ecosystem. Unlike other stablecoins pegged to actual cash reserves, the algorithmic stablecoin UST was run by a computer program supporting the preservation of its price equilibrium. LUNA/UST must be burned or produced to stabilize the price of this coin. However, UST started to depeg after a significant amount of its tokens were dumped. This led to more UST being dumped in panic selling, thereby increasing the supply of LUNA, which led to a knock-on effect that crashed the price. 

After the crash, the inflation of the token circulation supply rose significantly from at least 345 million tokens in circulation to 4.47 billion on May 12, 2022, and 6.5 trillion as of July 2 the same year. The LUNA Foundation Guard (LFG) worked hard to avert a crisis and prevent UST from being depegged by purchasing almost $3 billion worth of Bitcoin (BTC). 

Still, the unfolding crypto crisis poured cold water on the strategy. An effort by LFG to sell their BTC reserves of more than 80,000 BTC in an attempt to save UST is thought to have affected the larger crypto market causing BTC to fall below the $30,000 level.

## Will the burn help LUNA crypto recover? 

Holders of LUNC had hoped that the LUNA Classic burn would mop up excess liquidity and begin the work towards pushing its price towards the $1 mark. However, there’s a need for a significant burn before that goal can be achieved. With numerous LUNA supporters calling for LFG to buy out the burning supply, there are questions on whether TerraForm Labs has the resources to facilitate such massive burns.

LUNA's chance of returning anywhere near its previous highs of close to $100 is still tied to its ability to burn a significant portion of its current circulating supply and come down to close to 350 million tokens. While that remains the goal of the UST and LUNA's rehabilitation plan, how that can be accomplished remains a mystery. The [recent announcement](https://twitter.com/binance/status/1613816393723686912) by Binance Exchange that it would support the Terra Classic LUNC upgrade could create a positive impact and revive the decreasing on-chain burn rate of the LUNC tokens experienced during the last few weeks.

## Conclusion 

The Terra Classic community recently, through governance proposals [11242](https://classic-agora.terra.money/t/proposal-deprecate-seigniorage-reward-policy-and-increase-gas-fees-by-5x/49378/132) and Proposal 11243, effectively increased the burn rate while reducing contributions to the community pool. Still, the massive rally at the beginning of January didn't quite hold. There's still a remote possibility that [LUNA Classic](/news/article/luna-classic-news-future) could rise eventually and reach a desirable market cap and become a worthwhile investment.


LUNA Classic Burn - Will LUNC Rally Last?

On 15 September, 2022, South Korean prosecutors announced they had requested the international crime agency Interpol to issue Terra Labs co-founder Do Kwon a [red notice](https://www.coindesk.com/business/2022/09/26/interpol-issues-red-notice-for-do-kwon-report/).

The red notice is an international call to arms for all law enforcement agencies to locate and apprehend a person for extradition or similar legal actions.

Putting Do Kwon on the list makes him a man of interest to all law enforcement agencies anywhere in the world, making it difficult for him to hide.

On 19 September, South Korean prosecutors put out an arrest warrant for Kwon. This comes after they launched an investigation into Kwon and some associates at TerraLab after the fall of Terra Luna, which caused investors to lose $60 billion.

## Why was the red notice issued?

According to South Korean prosecutors, reaching out to Interpol for help was a reaction to the TerraLab co-founder's lack of cooperation with the investigation launched after the disastrous collapse of Luna.

## Do Kwon red notice 'hoax'?

Through all of this, Kwon has maintained that the red notice is an elaborate hoax. According to Kwon, the red notice is disputed since he hasn't received any official message.

It isn't only him who thinks this way. Some people also believe the Do Kwon red notice might just be South Korea's way of putting a target on Kwon's back.

## Where is Do Kwon now?

In the months since South Korean prosecutors asked Interpol to put Do Kwon on the infamous red list, the wanted co-founder has been nowhere to be found. Ironically, Do Kwon has made several tweets debunking the allegations that he is on the run and in hiding.

South Korean prosecutors have, however, maintained that Do Kwon has refused to make himself available to face the charges levelled against him in his home country.

Although Do Kwon was said to be in Dubai in October, no one has been able to confirm his whereabouts despite him being a guest on several podcasts. That was until 11 December, when it came to light that [Do Kwon had moved to Serbia](/news/article/do-kwon-hiding-in-serbia) from Dubai. The South Korean authorities are now in talks with Serbia's law enforcement agencies to gain cooperation in apprehending Kwon.



red notice mark on image of Do Kwon, Terraform labs founder. 

Do Kwon Red Notice Explained

South Korean prosecutors claim that the founder and CEO of [Terraform Labs](https://www.terra.money/), Do Kwon, is hiding in Serbia. They believe he left Singapore a couple of months earlier and moved to Serbia. 

[Do Kwon](/news/article/do-kwon-terra) is hiding as he was charged with a breach of financial laws. He is involved in the controversial collapse of the Terra ecosystem that startled the market. However, the global manhunt for the crypto fugitive is still going on. 

A report by [Chosun Media](https://www.chosun.com/economy/stock-finance/2022/12/12/VXFAUH7R7BFSVCYDEM7RNPRCXI/) says that the investigation authorities have stated that they received intelligence about his whereabouts in Serbia. They investigated further and “found it to be true".

## Do Kwon hiding: South Korean authorities seek cooperation

The South Korean investigation authority is already seeking to cooperate with the Serbian government. The Chosun Media report also suggests that the Financial and Securities Criminal Unit of Seoul Southern District Prosecutor will request assistance from Serbian officials. 

The authorities have yet to discover why Do Kwon left for Serbia. They believe it is only to avoid investigation and prosecution.

The notorious figure in the crypto industry earlier moved to Singapore just before [Terra-Luna collapsed](/news/article/terra-luna-collapse). In September, Seoul’s prosecutors issued red warrants for his arrest. The charges included breaching capital market regulations and also giving false information to investors. 

Since then, his whereabouts have not been known. The Korean authorities are yet to track down the fugitive's exact location. In October, they found out that he had left Singapore. He is believed to fly to Dubai and then to an unknown country. Singaporean officials also confirmed this news. 

![do kwon.png](https://s3.eu-west-2.amazonaws.com/prod-monitalks-media/do_kwon_810aeec14a.png)
  
In October, South Korea's Ministry of Foreign Affairs issued a warrant to surrender his passport. However, they have yet to get a response. Meanwhile, on Twitter, he maintained that he was not trying to hide.


red image of serbia with do kwon on foreground

Do Kwon hiding in Serbia, claim Prosecutors

Luna 2.0 is a new version of the Luna token, the new cryptocurrency of the Terra blockchain. It came into existence in May 2022 after Luna and TerraUSD (an algorithmic Stablecoin) crashed.

## Origin

When Terra’s tokens [crashed](/news/article/terra-luna-collapse), there were suggestions from investors in either of them about how to move on.

Many suggested a mass burning, but Do Kwon, the CEO and founder of the network, was against it, stating it would not benefit investors. He instead suggested a hard fork of the Terra blockchain, which received mixed responses from the community.

Despite much criticism, Kwon went ahead with the hard fork move. The hard fork resulted in two blockchains and cryptocurrencies.

The new blockchain and cryptocurrency became known as Terra 2.0 and Luna 2.0, respectively, while the old blockchain and cryptocurrency, which still exist, were renamed Terra Classic and Luna Classic (LUNC).

## Purpose

The new Terra token came into existence to compensate investors who had suffered heavy financial losses after TerraUSD crashed. The token was also a way for the platform to try and recover from the devastating market crash.

The new tokens were issued to those who held their old versions through airdrops. The token’s distribution plan included giving 35% of them to those who held its old version before the crash. TerraUSD holders received 10%.

Investors received the tokens based on how much of either the TerraUSD or old tokens they held before the crash.

## How is it different

Luna 2.0 was created without the vulnerability of its old version. It is designed to operate without depending on any stablecoin for value. The old version-maintained value through its relationship with the TerraUSD algorithmic stablecoin.

## Market performance

On 28 May, when the token first hit the market, it was worth $4.94, according to [Coinmarketcap](https://coinmarketcap.com/currencies/terra-luna-v2/). It would quickly appreciate, ending the month worth $10. Things would, however, take a huge turn for the coins going forward. They would slowly depreciate and start trading at $2 on 10 June.

The coin traded between $2 and $1 for most of the months to the time of writing. It is currently worth $2.68. It is ranked the 99th largest cryptocurrency globally, with a live market cap of $336,746,754.

There are currently 127,475,474 of them in public circulation. They are listed in several crypto exchanges, including Binance, KuCoin, OKX, and Bittrue.

In comparison, LUNC tokens, [as of writing](https://coinmarketcap.com/currencies/terra-luna/), are worth $0.0002662 each. They are ranked the 33rd largest cryptocurrencies in the world, with a live market cap of $1,637,683,104. 

It is worth noting that not many people are confident about the new Terra coins. Many were quick to sell theirs as soon as they were airdropped. While it is early for speculation, the coin is not performing well. There are, however, a few who are hopeful about its future.


What is Luna 2.0?

On 2 September, through its [Twitter page](https://twitter.com/terra_money/status/1565718424222932993), Terra announced that its community had voted to pass a second LUNA airdrop proposal. The proposal would see more than 19.5M new LUNA sent to wallets that did not receive the correct number of the tokens during the project’s first airdrop on 28 May.

According to the announcement, the claim interface went live on 4 September and users had until 4 October to claim the new tokens. Unclaimed ones would be sent back to the community pool.

The first LUNA airdrop took place to compensate [LUNA](/news/article/terra-luna-collapse) and TerraUSD Stablecoin holders after they became worthless in May.

TerraUSD, once considered the largest Algo stablecoin lost its 1 to 1 peg to the US dollar on 9 May. The company sold its Bitcoin reserves to try and save the algorithmic stablecoin, but ended up affecting the native token, dropping its price by 99%.

UST redemption efforts affected the entire crypto market. Bitcoin dropped to $27,000 and wiped out nearly $400billion of the total cryptocurrency market value in May alone.

The new tokens are to be distributed according to a two-year vesting schedule. 

Wallets holding less than 10,000 LUNC or AUST before the UST de-pegging from the US dollar will be subject to a two-year vesting schedule. The vesting schedule is intended to avoid liquidity instability, according to Terra.

## Issues

Both the first and second LUNA airdrop moves had distribution problems. Several users went on Twitter in May complaining about getting fewer tokens. Ashwsbreal, for example, on 29 May, 2022, [tweeted](https://twitter.com/Ashcryptoreal/status/1531002032840093696), “Lost $300k in LUNA. Got an airdrop of $59. Thank you Do Kwon and team".

The concerns were noticed by Terra, as the platform on 30 May [tweeted](https://twitter.com/terra_money/status/1531410663674888192) that some users had received fewer tokens than they expected and that they were working on a solution.

Several UST holders complained about their token distribution on social media after the second batch of the new tokens dropped.

A Twitter user named Joshcantcode1 [posted](https://twitter.com/joshcanspam/status/1566464297567502336), "Still hilarious that I had $3,500 UST and will never see it again! Thank you, Terra, for looking out for the community".

## Network hard fork

After UST crashed, Do Kwon proposed the creation of a new chain. Kwon is the founder and CEO of the platform. 66% of the project’s community agreed with the proposal, which led to the launch of LUNA 2.0, which has no connection to the UST stablecoin.

The new tokens had a great start. They entered the market on 28 May worth $4.94, and by 31 May, they were worth $10.72. They would, however, take a negative turn and drop to trading between $2 and $1 most of the months. As of writing, each of the coins is worth $2.74, according to [Coinmarketcap](https://coinmarketcap.com/currencies/terra-luna-v2/).

The coins are currently ranked the 99th largest cryptocurrency with a live market cap of $347,374,415. 127,475,474 of them are in public circulation.


Terra Executes Second LUNA Airdrop

After seeing an impressive rise following the collapse of [Terra](/news/article/terra-luna-classic) in May, Circle's dollar-pegged USDC coin has experienced a massive downfall.

The market capitalisation of Circle's [USDC coin has plummeted sharply](https://cryptopotato.com/usdc-lost-20-of-its-market-capitalization-in-the-last-30-days/) since the Tornado Cash scandal.

The stablecoin appears to have lost market share to rivals such as [Binance](/news/article/binance-hack) USD (BUSD), the world's third-largest stablecoin, and Tether. Since early July, the BUSD market value has increased by 21% to $21.66 billion. Tether has risen by 3% to $68.3 billion.

USDC dropped nearly 20% of its market capitalisation last month, falling from $53.3 billion to just below $43.9 billion. Almost $5 billion of stablecoin was withdrawn in a single day (26 September), depicting a loss of roughly 9.2% of its total capitalisation.

## The effects of freezing cash-linked Tornado addresses

Although the coin started to lose popularity in July, the action to freeze more than 75,000 circle coins of funds associated with 44 [Tornado Cash](/news/article/tornado-cash) addresses was a turning point that led to backlash and a wave of withdrawals.

Even MakerDAO, which had a significant portion of its reserves backed in USDC, viewed Circle's actions as a breach of privacy rights. The project began to discuss abandoning its reliance on the coin, arguing that given the extreme level of centralisation the coin has by nature, it could face the same consequences as the wallets connected to Tornado Cash at any time.

Even though it appeared MakerDAO was turning against the coin, they announced yesterday that a new plan to deposit USDC on Coinbase's institutional custody platform had been approved. They will escrow up to $1.6 billion in USDC reserves on Coinbase Prime to earn 1.5% in rewards. 

Therefore, even the coin capitalisation keeps declining, significant projects still place bets on its potential for future recovery.

## Bottom line

Although the current outlook for [USDC](/news/article/circle-usdc) is not promising, the project will likely maintain its position among the top five cryptocurrencies. However, they must regain the trust of some major exchanges and projects in the crypto community, and the compliance card may entice more players to join their ranks.


USDC coin loses 20% of market capitalisation

In May 2022, the need for Terra solutions landed. The Terra ecosystem experienced a catastrophic crash, with more than $50 billion wiped out from the market as [LUNA plunged](/news/article/terra-luna-collapse) by 100%. 

[Terraform Labs](https://www.terra.money/) is a platform that introduced one of the most popular algorithmic stablecoins, [TerraClassic USD (UST)](https://coinmarketcap.com/currencies/terrausd/). It also introduced a high-performing coin, LUNA, now known as LUNAClassic. But this year, its price declined from over $100 to $0. 

Since then, the platform has been making efforts to revive the project. Among them, one of the significant steps has been the launch of Terra 2.0. Meanwhile, the CEO of Terraform Labs, Do Kwon, has offered several Terra solutions for its restoration.

Here, we look at how the platform plans to move ahead and whether it will be restored in the near future!

## How did the crash happen?

The platform operates on a swapping mechanism of two crypto tokens; UST and LUNA. The former is an algorithmic stablecoin backed by USD. The latter powers the blockchain and helps maintain UST's value at $1.

This system allows holders to swap these tokens to get a guaranteed $1.

Unfortunately, this mechanism was not sustainable as there were no assets to back UST. That’s why when it lost its peg to the USD, it crippled the entire ecosystem. The algorithm failed when people started to burn LUNA to get UST’s $1. 

## Terra solutions proposed by Do Kwon

Right after the debacle, the founder and CEO of Terraform Labs took to Twitter to propose solutions for the recovery of the ecosystem. Kwon tried to reassure the LUNAtics community in a [thread](https://twitter.com/stablekwon/status/1524331171189956609) and gave possible Terra solutions. He acknowledged the selling pressure on LUNA and proposed a four-times increase in minting. The idea was to help strengthen TerraUSD so investors could cash it out anytime. Kwon also formally presented it at the governance forum. 

Terraform Lab’s CEO put forth another proposal, [1623](https://station.terra.money/). This endorsed the origin of a new chain, which was eventually accepted. Following the acceptance of this solution, a 2.0 version surfaced, and previous versions were renamed to classic ones. The ecosystem also airdropped the new tokens for the existing holders. This was a recovery plan to reset the network.

## Are Do Kwon's Terra solutions sustainable?

After the emergence of a new chain, [LUNA](/news/article/luna-price-prediction) has seen a quiet recovery period. Besides, it recently experienced a positive run where its price reached $6.72. However, currently, it's worth is again down to $2.72. It would be too early to comment on how this new blockchain is performing. But, indeed, there are some key issues.

First, this version has not influenced the current state of the classic UST. One reason behind that is the lack of investor confidence in the token. Investors are still not ready to exchange their dollars for this stablecoin. 

Second, its airdrops pledge 40% for the old token holders. This move will also be ineffective as it would distribute the amount unequally. Ideally, the holders who have more stakes should be compensated more. 

Moreover, another loophole about the airdrops is the involvement of the Anchor protocol. Not all investors had their tokens on this platform at the time of the collapse. So, how will it compensate wallets on other exchanges? 

Nonetheless, these Terra solutions are quite reasonable considering the extent of the collapse. However, for a sustainable solution, transparency is most important. Moreover, the lack of clarity about the $3.5 billion Bitcoin reserve, and the issue of Kwon hiding from the authorities, have increased the community’s suspicion. 

## Final thoughts 

Terraform Labs have gone through a disastrous collapse. So far, it is the worst in the crypto market’s short history. The loopholes in its algorithmic stablecoin resulted in draining billions from the market. Several Terra solutions were advanced for recovery. One major step towards it has been the fork of the blockchain.

It has helped in the recovery phase of the ecosystem. But there are still several issues with this approach. For sustenance, changes in algorithm and transparency are inevitable. 
 


Terra Solutions: How is it Moving Forward?

Luna Classic (LUNC) is the native token of the original [Terra LUNA](https://www.terra.money/) blockchain. After the Terra collapse, Do Kwon planned a recovery strategy that included building a brand-new chain where all future transactions would occur.

The Terra and Luna Classic chains were created from the old chain. The new chain is called Terra (also referred to as LUNA 2.0), and the native token of the original Terra blockchain is LUNC.

The term "classic" likely refers to the hard fork between Ethereum and Ethereum Classic following Ethereum's 2016 decentralised automated organisation (DAO) breach. This is just another ploy to depict the UST crash as "Terra's DAO hack moment".

## Why are there two versions of Terra?

Do Kwon and Daniel Shin introduced the original blockchain in January 2018, and the LUNA ICO began at the beginning of 2019. 

The TerraUSD (UST) stablecoin, along with its sister [token Luna, crashed in early May 2022](/news/article/terra-usd) after losing its peg to the USD. Additionally, it brought down the entire cryptocurrency market, introducing the start of crypto winter.

Do Kwon created a recovery plan for the blockchain that stipulates that the blockchain will go through a hard fork and split into two chains, and the new chain won't have any stablecoin.

On May 25, 2022, the blockchain validators approved the plan and, on May 28, Terra 2.0 launched.

LUNA is Terra 2.0's native token. Meanwhile, the original blockchain has been renamed Terra Classic, and its native token is LUNC.

## The Luna hard fork

Do Kwon proposed a hard fork to revive the network after the entire ecosystem collapsed. When two chains split from the original chain, this is referred to as a hard fork. The new and old versions remain functional, but they no longer interact with one another.

Terra Classic is a tribute to Ethereum Classic, created after the Ethereum DAO hack that split Ethereum in two in 2016.
Terra 2.0's ecosystem no longer includes any algorithmic stablecoins, and holders of the original LUNA token received new tokens via airdrop. The new tokens were distributed via airdrop to Luna Classic holders, stakers, residual UST holders, and app.

## Where to purchase Terra Luna Classic?

Luna Classic is available on many cryptocurrency exchanges. These include, for instance, [Binance](/news/article/guide-to-binance-uk), [KuCoin](/news/article/kucoin-crypto-metaverse), FTX, and Kraken. Most of the crypto exchanges supporting Luna 2.0 will continue to support LUNC.

Some owners increased their purchases of LUNC in the run-up to the new chain. Existing token holders received a share of the new tokens that were part of the airdrop. This implies that all current owners of LUNC are now owners of Luna 2.0.

However, trading in LUNC was suspended before the debut of the new chain. It was stated in the Binance Luna 2.0 support announcement that LUNC trading would resume on May 30.

## Price prediction for Terra Luna Classic

Due to the bearish token and crypto market, the price remained at a low of $0.0001 for several months after rebranding.
LUNC, on the other hand, rallied after its tax burn proposal was approved and went live on September 21, 2022. The tax consumed 1.2% of all blockchain transactions, reducing LUNC supply while increasing demand.

Binance's announcement on September 26, 2022, to burn all trading fees on LUNC spot and margin trading pairs boosted the price of LUNC even further. Within a few hours, the LUNC price increased by more than 60%, from $0.00018 to $0.0003.

Despite its history of implosion, the recent good news has left many crypto experts relatively optimistic about Luna Classic's future.

According to [DigitalCoinPrice](https://digitalcoinprice.com/forecast/terra-luna/2025), the price of LUNC will rise over the next five years and reach around $0.0012 by 2025. However, they do not expect the price to rise significantly in the coming decade.

## LUNA Classic's future

There's no denying that the original [blockchain crash](/news/article/terra-luna-collapse) in May 2022 shook many investors' and crypto enthusiasts' confidence. People quickly questioned Terra's ability to return.

The Terra Classic blockchain has shown promise since the fork. The coin has gained traction, notably since Binance announced the LUNC tax burn on its transactions. This indicates that the value of LUNC may rise in the coming years.

However, [INTERPOL](https://www.interpol.int/en) has [reportedly](/news/article/do-kwon-terra) requested that law enforcement agencies locate and arrest Do Kwon. Terraform Labs, the development firm behind Terra, has also been accused of operating a Ponzi scheme. As a result, it's difficult to predict whether LUNC will succeed or crash.

However, it is an intriguing cryptocurrency to follow, and you should keep an eye on it for future developments.



What is Terra Luna Classic?

It might seem we’ve not heard the last from the Do Kwon Terra debacle, as Interpol has issued a red notice for the arrest of the embattled founder of Terraform labs.

The South Korean security authority has been investigating the case; however, the embattled Terra founder has not been cooperating and is believed to be on the run.

With Interpol's red notice, security agencies worldwide are requested to start a search and arrest him.

## Do Kwon's statement on the Terra collapse investigation

Do Kwon, in a series of tweets via his official Twitter handle ([@stablekwon](https://twitter.com/stablekwon/status/1571197156907679745)), has denied not cooperating with the security agencies. He further claimed he’s not on the run as speculated in the media.

[Do Kwon's Terra labs collapsed earlier this year](/news/article/terra-luna-collapse), which led to the loss of investors' money estimated to be around $40 billion.

Many investors have lost their money through investment in LUNA and can’t wait to get clarity on the investigation presently being carried out. This case is one that the whole crypto community is observing with keen interest.

## Legal Issues in the cryptocurrency industry

There seem to be a lot of legal issues in the cryptocurrency industry, and Do Kwon Terra issues is not the only one taking centre stage.

Ripple labs, the parent company of Ripple, is presently embroiled in [legal issues with SEC](/news/article/xrp-court-case-update) in what seems to be the longest court case in the cryptocurrency industry's history.

A [Dogecoin](/coins/doge) investor also [sued Tesla and SpaceX CEO Elon Musk](https://news.sky.com/story/elon-musk-sued-for-258bn-over-claims-he-ran-a-pyramid-scheme-to-promote-dogecoin-12635334) for $258 billion (€245 billion) for allegedly "running a pyramid scheme to support the cryptocurrency".

In an accusation filed in Manhattan federal court, plaintiff Keith Johnson accused Musk, the electric vehicle maker and the space tourism company CEO of racketeering by touting Dogecoin and driving its price up, only to let it tumble.

Key Tech figures like Warren Buffet and Bill gates have earlier questioned the worth of Bitcoin. The major criticism of Bill Gates is the anonymity and irreversibility of transactions, while Buffet doesn’t see it as a means of utility.



Terra debacle: Interpol issues red notice on Do Kwon

Daniel Shin, the co-founder of Terra Labs, was the subject of attention on Wednesday, July 20, as his home was invaded by prosecutors, according to a [news media report](https://www.msn.com/en-us/money/companies/south-korean-prosecutors-raid-terra-co-founder-daniel-shins-home-report/ar-AAZQNFF?fromMaestro=true).

The report said the raid came about due to investigators believing the crash of the algorithmic stablecoin TerraUSD (UST), which led to the market crash of May, was due to fraud on the part of the executives of the crypto company.

In May, [UST collapsed](/news/article/terra-luna-collapse). It was supposed to hold its peg against the United States Dollar (USD), like Tether (USDT), Circle's USDC, and Binance USD (BUSD), which continue to hover around $1.

This led to several exchanges and hedge funds falling victim to overexposure. Due to the impact of the crash in Terra, investors who poured liquidity into LUNA, the native asset of the Terra ecosystem, filed a complaint against co-founder Do Kwon and Terraform Labs.

Many of the investors' alleged that fraud and extensive violations of securities laws in the country led to them suffering irrecoverable losses.

A series of lawsuits have followed for other projects, with the high-profile case being the suing of self-proclaimed DogeFather Elon Musk by a Dogecoin investor for billions of dollars.

## Why is Daniel Shin being targeted? 

As an executive of Terra Labs, he is in a better position to know the activities that preceded the collapse of one of the most vibrant ecosystems in the crypto finance industry than many. Terra Labs had more than $30 billion in total value locked (TVL) before the market downturn, per DeFiLlama.

In the early days of the week, authorities raided local cryptocurrency exchanges including Upbit and Bithumb.

In June, a travel ban was placed on many stakeholders, including former staff members of Terraform Labs.

Aside from Shin, co-founder Do Kwon is alleged to have evaded the paying of taxes and the government continues to investigate the crypto executive.
The two heads of the crypto firm are residents of Singapore, but it is unclear if they live there on a full-time basis.

With that said, the revival of Terra (LUNA) continues to see above-average liquidity. As of writing, LUNA was exchanging hands for $1.93 and had a trading volume of approximately $58.29 million, per data from CoinMarketCap..


Daniel Shin’s Home Raided by South Korean Authorities

The UK parliament member, Matt Hancock urged the issue of Bitcoin’s necessity of having an open [regulatory framework](/news/article/crypto-tax-uk) that resulted in a crypto analyst positive stance on the sector.

Hancock recently revealed that even though the crypto market did go through a huge sell-off, that hasn’t shaken his faith in the sector. 

Regarding the recent crash of the cryptocurrency terra (LUNA) (UST), he said that this was just something that happens even in the mature markets.

“The crash of Luna and the pressure on other stablecoins serves as a reminder that cryptocurrencies are still currencies and the age-old rules of finance still apply,” he opined and compared the situation with the dot-com bubble crash in 2001.

“The underlying technology is so powerful … Just because the dot-com bubble crashed in 2001, we didn’t discredit the internet as a technology,” he concluded.

“No country can stop this revolution. We can only choose whether it happens on our shores or happens to us from elsewhere,” he commented and added that the UK can succeed only if and when it decides to embrace the new technology.

This also means, said Hancock, that the government has to be able to adjust to crypto because, in liberal governments, no one should tell “people what they can and can’t do with their money”.

“The job of the regulators is to make sure there is high-quality information and that the market functions effectively. What remit does the state have to tell them what they can and can’t invest in? I think that’s incredibly patronizing, ”Hancock asserted.

Aligned with Hancock’s sentiment, the crypto analyst Madeleine Hume also believes that [crypto integration](https://www.morningstar.co.uk/uk/news/220381/5-charts-on-crypto%2339%3bs-past-present-and-future.aspx) is crucial. “Rather than a swift takeover, we expect that integration with existing systems across financial services and other sectors will likely determine future adoption rates in the space,” she commented.

Hancock is no stranger to being a [crypto advocate](https://www.monitalks.io/news/article/crypto-tax-UK). He is famous for his claims that crypto regulation can be fantastic for the growth of the overall economy but also for making financial systems more transparent and reducing crime. 

“We must understand and harness the potential of new technologies, not fear and avoid their disruptive power,” he said.

Still, he admitted he hasn’t invested in cryptocurrencies himself explaining that he wanted to “speak freely” about it without fear of having a conflict of interest.


Crypto analyst view correlates with UK parliamentary sentiment

The [Terra Luna](https://coinmarketcap.com/currencies/terra-luna/) collapse wiped billions from the crypto market. Will it recuperate?

Visualise the moment when your entire investment is wiped out suddenly. That's the harsh reality for millions of investors in the Terra Luna cryptocurrency. Its value dropped dramatically from more than $100 per coin to less than $1, losing 99% of its value within a few minutes and sending huge repercussions around the whole crypto world.

So, what's the reason behind Terra's Luna cryptocurrency price collapse, and what impact will it have on the crypto market?

## What is Terra Luna?

Terra Labs, a South Korean blockchain development company, designed the project Terra network, which comprises two cryptocurrencies: TerraUSD (UST) and Luna (LUNA).

The Terra network authorises blockchain developers to make custom blockchains and DApps for a broad range of use cases, but typically operates on Delegated Proof of Stake (DPoS) algorithm. The network focuses on DeFi, NFT projects, and Web 3.0 apps. It's linked to other significant blockchains, including Ethereum, Binance Smart Chain, and Harmony, and is deemed a powerful player in the DeFi world.

Terra network possesses two native tokens, UST and LUNA, and both have different functions. UST is a stablecoin, implying its value is pegged to $1 and is utilised to risk or shift tokens when markets become jerky. In contrast, LUNA is a more tradable investment whose price fluctuates depending on market circumstances.

Both coins are intrinsically linked, with UST pegged to LUNA using something named "algorithmic pegging". Typically, a stablecoin is funded 1:1 with a tangible asset, like gold or dollars, ensuring investors that the value will stay at $1 (or reasonably close).

Algorithmic pegging operates a smart contract to alter the value of the linked assets automatically. In this case, the smart contract automatically uses LUNA tokens to mint new UST tokens, maintaining the UST price stable and LUNA deflationary (theoretically). So, no matter the market conditions, 1 UST can consistently be redeemed for or coined for exactly 1 LUNA.

## Reason Behind Terra Luna Collapse

The sudden Terra Luna collapse took place in early May 2022, when the value of UST unexpectedly began falling from its $1 peg.

The unexpected price fall caused a massive number of LUNA to be minted to stable the UST value, saturating the market with LUNA tokens. This pushed the price down and smashed LUNA's price overnight. Indeed, LUNA moved from a top 10 crypto to descending outside the top 150 overnight. Its circulating market supply tripled from about 350 million to more than 1.4 billion in just two days.

Terra Labs had assembled around $3 billion in [Bitcoin](/coins/btc) to begin building a reserve. It wasn't nearly sufficient to stop the market drop. The company was compelled to vend its resources (against a Bitcoin market that has also lost significant value over the same course). Ultimately, there was no more $1 value of LUNA for every UST, implying both cryptos would drop altogether without any clear path to recovery.

UST is an algorithmic stablecoin. Eventually, its stability is naturally related to market volatility. When support for either related cryptocurrency becomes a problem, there is always a possibility that one or both will collapse and witness a market fall.

Now, with the value of UST still not redeemed to its $1, Terra is trying to raise the supply of LUNA to boost the burn rate and saturate the market with coins, putting more downward pressure on the crypto.

## Will Terra Luna recover?

Amid the market crash, Terra Labs CEO Do Kwon presented a Terra Luna recovery strategy to stabilise the present crypto destruction. According to his plan, he will work to stabilise the Layer-1 ecosystem.

The strategy is:

•	A new LUNA with a supply of 1 billion will be spread across the community
•	40% of this LUNA will be given to existing holders before the depeg
•	A further 40% will be given to present UST holders
•	10% will go to current LUNA holders
•	the last 10% will go to a community pool for development

This recovery strategy prioritises the Terra Layer-1 as Kwon and the community strive to protect the broader ecosystem.
Kwon said Terra Luna needs a growing community to make its blockspace valuable again.

"The only way to do this is to make sure that token holders before the attack commenced, the most loyal community members and builders, stick around to keep providing value," he added.

Right now, it is just a proposal to recover the Terra loss. The crypto market is highly volatile and we are left to wait and watch until the market stabilises.
 



Terra Luna Collapse: Why Did It Happen

The value of Luna plunged sharply on Wednesday, from $6.75 to a little over $1. As of Thursday afternoon, the currency was worth only $0.02. The sibling token of the controversial stable currency [TerraUSD](https://coinmarketcap.com/currencies/terrausd/) is now effectively worthless.

According to Coin Gecko statistics, Luna fell to $0 on Friday, a remarkable decline for a cryptocurrency formerly valued at more than $100. 

TerraUSD, sometimes known as UST, is designed to be tied to the US dollar one-to-one. When the UST decoupled from the dollar earlier this week, values plummeted. UST has lost its peg and was trading at 12 cents on Friday, according to statistics.

Traders prefer to acquire currencies such as [Bitcoin](/coins/btc), [Ether](/coins/eth), and [Dogecoin](/coins/doge) using digital assets tied to the dollar since only the price of the crypto asset changes when they buy or sell. 

## Stablecoins Rise in Popularity

Stablecoins enable quick trade without the lengthy settlement timeframes associated with government-issued currencies, which might take days. If a person wants to sell Bitcoin and immediately lock in their dollar winnings, they might do so by purchasing a stablecoin on major cryptocurrency exchanges.

UST and Luna are connected. UST is referred to as an algorithmic stable currency, which means there is an expectation that its $1 peg will be managed by the underlying code. This is fundamentally different from other stable currencies, such as tether and USDC, which are backed by real-world assets like bonds. UST has no real-world reserves. 

Algorithmic stablecoins are not backed by assets, instead relying on financial engineering to maintain their ties to the dollar. Previously, the algorithmic stable currency TerraUSD kept its $1 price by depending on traders to perform an arbitrage function between Terra and Luna values. 

When Terra went below the peg, merchants would "burn" the stablecoin, taking it out of circulation by swapping TerraUSD for $1 worth of fresh Luna units. This move lowered TerraUSD's supply and increased its price. When the value of TerraUSD soared beyond $1, traders might burn Luna and generate new TerraUSD, boosting the supply of the stablecoin and bringing its price back down to $1. Traders said a series of significant withdrawals from Anchor Protocol, a crypto bank established by developers at Mr. Kwon's business Terraform Labs, was the cause for the decline. It began during the 7-8 May weekend and spiralled out of control the following Monday. Digital currency investors use such services to earn interest on their coins by lending them out. 

The Anchor platform held most of the stablecoin's supply. According to the platform's website, investors had invested more than $14 billion in TerraUSD in Anchor by early May. Large trades eroded TerraUSD's $1 value during that May weekend. 

Because of the volatility, many investors withdrew their TerraUSD from Anchor and sold the coin. As a result, additional investors withdrew from Anchor, causing a chain reaction of more withdrawals and selling. TerraUSD deviated from its dollar peg as the supply-demand equilibrium was disrupted. Luna, its sister coin, has also seen its value fall. The crypto community speculates that an anonymous trader triggered the run as part of an "attack" on the stable currency. 

## Anchor TerraUSD Deposits Drop

According to the company's website, Anchor's TerraUSD deposits had dropped to around $1.6 billion on 13 May. The Terra blockchain, which underlies UST and Luna, has also stopped processing transactions twice in less than 24 hours, adding to the problems. Before the catastrophe, $14 billion in TerraUSD was placed in Anchor. There is less than $200 million remaining.
  
The Luna Foundation Guard may be running out of funds as well. Its crypto reserves are down to less than $90 million, and it has no Bitcoin in its wallet. The breakdown also impacted the Terra blockchain, which was momentarily unavailable on Thursday "to avoid governance assaults".

Meanwhile, Binance, the world's largest cryptocurrency exchange, delisted UST and Luna on Friday. Many traders have sold, believing that the assets would not be able to recoup their losses. Even Bitcoin fans have expressed concern. 
 
Nonetheless, the collapse spread. Luna's Bitcoin hoarding spread to other cryptocurrencies. Traders anticipating a TerraUSD breakdown appear to have sold Bitcoin, leading to the token's falls. This, in turn, undermined demand throughout crypto markets, which lost more than $400 billion in market cap as several tokens, including Bitcoin, Ether, Cardano, and Solana, fell by more than 20%.

The incident has also drawn policymakers' attention back to the absence of regulation around stable coins and the larger cryptocurrency sector. As TerraUSD broke from its peg on 10 May, Treasury Secretary Janet Yellen reiterated her appeal for Congress to establish laws governing stable currencies.


Why did TerraUSD and Luna Crash?

Early December was a brutal period for the crypto market, as it crashed substantially. While it has recovered since, crypto assets like BTC, MANA, SAND and GALA are yet to hit the highs they experienced in November. 

Causes include the volatile period for traditional financial markets and skewering inflation.

There is a silver lining though. Terra (LUNA) surged in price and Terra-TVL grew considerably in the past week or so. Why are people choosing Terra stablecoins over other US$-backed assets?

## TerraUSD, a truly decentralised stablecoin

TerraUSD (UST) is a decentralised, algorithmic stablecoin that offers a scalable solution for DeFi. Decentralised stablecoin leaders like DAI face severe scalability problems and UST offers a viable solution. 

People are finally realizing UST’s potential, which also includes easy exchange, passive income potential and interoperability. The ability to earn income off stablecoin deposits is a key factor currently driving its acceptance. The fact that UST held its peg during the crypto crash is big news and a significant event for the DeFi ecosystem at large. 

While stablecoins like USDT, USDC, BUSD and TUSD failed to do so, UST held strong. Earlier this year, it was impossible to think of an algorithmic stablecoin outperforming the above-mentioned stablecoins. More and more exchanges are introducing UST pairs, the latest being KuCoin with SOL/UST and MATIC/UST.

Now, one of LUNA's capabilities is ensuring the price stability of Terra stablecoins. 

## LUNA burning drove scarcity

From 26th November to 5th December for example, roughly 10 million LUNA tokens were burnt! The reason is simple. As more people are purchasing UST and exchanges are introducing UST pairs, a larger number of UST will have to be minted to meet growing demands. 

This in turn leads to LUNA burning, most of which is done by buying LUNA off the open market. 

## Conclusion

Confirming fundamentals means LUNA should be a key part of your core holdings and at the top of your ‘buy the dip’ coin list. LUNA surged to an ATH recently, so do not rush and buy the coin now.



Latest Moni

TerraUSD News

Read the latest TerraUSD news.

Terraform Labs CEO Do Kwon Arrested

USDC vs USDT: Understanding the Stablecoins

Terraform Labs Accused of Fraud by SEC

LUNA Coin Latest News

LUNA Classic Burn - Will LUNC Rally Last?

Do Kwon Red Notice Explained

THORchain Explained

Uniswap Ledger Connect Guide

UAE CBDC to Complete First Phase by 2024