Terra/LUNA Collapse
- Stablecoin
The Terra blockchain’s algorithmic stablecoin TerraUSD (UST) lost its $1-USD peg, triggering a rapid devaluation that saw UST fall to pennies and its sister token LUNA collapse from over ~$100 to near zero within days. This “death spiral” wiped out around $45 billion in market capitalization and severely shook confidence across the broader crypto market. The design relied on an unstable mint-and-burn arbitrage mechanism rather than traditional collateral, making it especially fragile once large holders began selling. The collapse led to bankruptcies, investor losses worldwide, and intense scrutiny by regulators; Terraform Labs ultimately filed for bankruptcy and founder Do Kwon has since been convicted and sentenced to 15 years in prison for fraud tied to the crash.
Incident Details
- Type
- LEVERAGE COLLAPSE
- Funds Lost
- $40B
- Status
- Total loss
Do Kwon charged with fraud; triggered cascading failures across crypto lending platforms.