# Crash of LUNA and UST
**URL:** https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401
**Category:** Investing / Cryptocurrencies
**Created:** [May 11, 2022, 1:19pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401 "2022-05-11T13:19:22Z")
**Posts on this page:** 20
**Page:** 3
### Author:  [@stojano](https://forum.mustachianpost.com/u/stojano)
#### Post date: [May 12, 2022, 9:31am UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/47 "2022-05-12T09:31:12Z")
buy and forget… for the giggles and maybe wonders… as well couple 100s.
I’m sorry for some guys having all net worth in LUNA…
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### Author:  [@SwissTeslaBull](https://forum.mustachianpost.com/u/SwissTeslaBull)
#### Post date: [May 12, 2022, 9:49am UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/48 "2022-05-12T09:49:55Z")
I bought 200 Luna just for fun 🌑
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### Author:  [@stojano](https://forum.mustachianpost.com/u/stojano)
#### Post date: [May 12, 2022, 11:03am UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/49 "2022-05-12T11:03:46Z")
I wonder if on Kraken Luna staking there will be still UST and LUNA distributed… and how much it will be.
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### Author:  [@Bojack](https://forum.mustachianpost.com/u/Bojack)
#### Post date: [May 12, 2022, 11:18am UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/50 "2022-05-12T11:18:18Z")
Don’t know why I care, but plz someone explain it to me in one sentence, what is Terra, TerraUSD and Luna? Why are these names all put together?
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### Author:  [@stojano](https://forum.mustachianpost.com/u/stojano)
#### Post date: [May 12, 2022, 11:35am UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/51 "2022-05-12T11:35:15Z")
Terra is the network (I think on top of another one). LUNA and TerraUSD (UST) are tokens on this network. UST is stablecoin and LUNA is used (somehow) to peg the UST to USD.
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### Author:  [@stojano](https://forum.mustachianpost.com/u/stojano)
#### Post date: [May 12, 2022, 11:36am UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/52 "2022-05-12T11:36:38Z")
> [@stojano](#):
>
> I think on top of another one
not correct… I google… built with cosmos SDK
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### Author:  [@johndoe1](https://forum.mustachianpost.com/u/johndoe1)
#### Post date: [May 12, 2022, 11:48am UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/53 "2022-05-12T11:48:21Z")
> [@Bojack](#):
>
> Don’t know why I care, but plz someone explain it to me in one sentence, what is Terra, TerraUSD and Luna? Why are these names all put together?
Basically very intricate houses built on sand (aka hope), as far as I understand. I find it curiously fascinating.
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### Author:  [@FIREstarter](https://forum.mustachianpost.com/u/FIREstarter)
#### Post date: [May 12, 2022, 11:55am UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/54 "2022-05-12T11:55:10Z")
> [@stojano](#):
>
> LUNA and TerraUSD (UST) are tokens on this network. UST is stablecoin and LUNA is used (somehow) to peg the UST to USD.
Terra itself was created in January 2018, LUNA was (approximately) created in April 2019, while TerraUSD (UST) was only created in September 2020 (as a stablecoin).
What killed LUNA was the link to UST. As long as 1 UST = 1 USD, everything is fine. If the rate drops significantly, you can earn a lot of money using arbitrage by burning UST and minting LUNA. That’s what happened yesterday and two days ago - someone making BIG arbitrage gains (we’re talking billions of USD) by using this mechanism.
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### Author:  [@Bojack](https://forum.mustachianpost.com/u/Bojack)
#### Post date: [May 12, 2022, 12:33pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/55 "2022-05-12T12:33:59Z")
Cool, thanks guys. But all these people who have invested their money in LUNA haven’t known about this potential exploit? Even the founder didn’t know?
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### Author:  [@FIREstarter](https://forum.mustachianpost.com/u/FIREstarter)
#### Post date: [May 12, 2022, 12:47pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/57 "2022-05-12T12:47:10Z")
[Here](https://www.youtube.com/watch?v=y_otSD3LYCA) you can watch a Ben Felix style video about what happened with UST und LUNA (minus the advertisement around 10:50) Much better explained than I could ever do it.
> [@Bojack](#):
>
> Even the founder didn’t know?
The founder is an a$$hole who behaved like he’s the king of the world in the past. Inflated ego squared. So either he simply didn’t know, or just chose to ignore it.
The founder knew about the risk already half a year ago, when someone mentioned it to him on Twitter. I’m just searching to find where it was…
Or maybe even worse: he knew about it right from the beginning: [https://twitter.com/realryunsu/status/1524321203590418433](https://twitter.com/realryunsu/status/1524321203590418433)
Edit: @hereby hereby just posted the link. Thanks!
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### Author:  [@Kay4rElle](https://forum.mustachianpost.com/u/Kay4rElle)
#### Post date: [May 12, 2022, 3:00pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/58 "2022-05-12T15:00:19Z")
Well people where blinded by the 20% APR and the fact that LUNA had insane gains over 2 years (since every ust created lowered the LUNA in circulation).
Hard to stay rational when you are always winning…
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### Author:  [@Dr.PI](https://forum.mustachianpost.com/u/Dr.PI)
#### Post date: [May 12, 2022, 3:26pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/59 "2022-05-12T15:26:43Z")
> [@Dr.PI](#):
>
> On Monday I calculated my index and it was in position 7, and at some point it was number 5 I think.
And now LUNA is positioned # **392** at coinmarketcap! Incredible.
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### Author:  [@Dr.PI](https://forum.mustachianpost.com/u/Dr.PI)
#### Post date: [May 12, 2022, 3:29pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/60 "2022-05-12T15:29:06Z")
> [@Dr.PI](#):
>
> liquidating my all locked UST positions except of 200 with the longest term and the highest interest.
Liquidated all UST positions. Not a time for side bets, I need funds to save my main leveraged portfolio.
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### Author:  [@nabalzbhf](https://forum.mustachianpost.com/u/nabalzbhf)
#### Post date: [May 12, 2022, 3:32pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/61 "2022-05-12T15:32:41Z")
> [@Bojack](#):
>
> what is Terra, TerraUSD and Luna? Why are these names all put together?
> [@](#):
>
> An “algorithmic stablecoin” sounds complicated, and there are a lot of people with incentives to pretend that it is complicated, but it is not. Here is how an algorithmic stablecoin works[1]:
>
> 1. You wake up one morning and invent two crypto tokens.
> 2. One of them is the stablecoin, which I will call “Terra,” for reasons that will become apparent.
> 3. The other one is not the stablecoin. I will call it “Luna.”
> 4. To be clear, they are both just things you made up, just numbers on a ledger. (Probably the ledger is maintained on a decentralized blockchain, though in theory you could do this on your computer in Excel.)
> 5. You try to find people to buy them.
> 6. Luna will trade at some price determined by supply and demand. If you make it up on your computer and keep the list in Excel and smirk when you tell people about this, that price will be zero, and none of this will work.
> 7. But if you do a good job of marketing Luna, that price will not be zero. If the price is not zero then you’re in business.
> 8. You promise that people can always exchange one Terra for $1 worth of Luna. If Luna trades at $0.10, then one Terra will get you 10 Luna. If Luna trades at $20, then one Terra will get you 0.05 Luna. Doesn’t matter. The price of Luna is arbitrary, but one Terra always gets you $1 worth of Luna. (And vice versa: People can always exchange $1 worth of Luna for one Terra.)
> 9. You set up an automated smart contract — the “algorithm” in “algorithmic stablecoin” — to let people exchange their Terras for Lunas and Lunas for Terras.[2]
> 10. Terra should trade at $1. If it trades above $1, people — arbitrageurs — can buy $1 worth of Luna for $1 and exchange them for one Terra worth more than a dollar, for an instant profit. If it trades below $1, people can buy one Terra for less than a dollar and exchange it for $1 worth of Luna, for an instant profit. These arbitrage trades push the price of Terra back to $1 if it ever goes higher or lower.
> 11. The price of Luna will fluctuate. Over time, as trust in this ecosystem grows, it will probably mostly go up. But that is not essential to the stablecoin concept. As long as Luna robustly has a non-zero value, you can exchange one Terra for _some_ quantity of Luna that is worth $1, which means Terra should be worth $1, which means that its value should be stable.
>
> All of this is, I think, quite straightforward and correct, except for Point 7, which is insane. If you overcome that — if you can find a way to make Luna worth some nonzero amount of money — then everything works fine.
from [Terra Flops - Bloomberg](https://www.bloomberg.com/opinion/articles/2022-05-11/terra-flops)
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### Author:  [@Bojack](https://forum.mustachianpost.com/u/Bojack)
#### Post date: [May 12, 2022, 4:24pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/62 "2022-05-12T16:24:59Z")
So what went wrong? Was the problem that Luna was worth 0? If Luna was mined by consuming energy, would it be then worth something?
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### Author:  [@nabalzbhf](https://forum.mustachianpost.com/u/nabalzbhf)
#### Post date: [May 12, 2022, 4:29pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/63 "2022-05-12T16:29:47Z")
You can read the rest of the article, I don’t think we know the details, but there was a loss of confidence (maybe triggered by external event, it’s also slightly more complicated since they’re trying to sustain the rate with BTC reserves that were built over time as well, which also adds pressure to BTC).
As mentioned, those coins are sustained by confidence in the end the terra is worth 0 or 1 (and probably won’t stay very long in the middle).
So maybe that’s a buy opportunity, if the magic is reoccurs, UST will double.
> [@Bojack](#):
>
> If Luna was mined by consuming energy, would it be then worth something?
There’s no reason it would change anything, how you create coin doesn’t add to the value.
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### Author:  [@anon95353169](https://forum.mustachianpost.com/u/anon95353169)
#### Post date: [May 12, 2022, 5:02pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/64 "2022-05-12T17:02:09Z")
The videos by Coffeezilla on LUNA and UST are quite interesting. If everything is true, this was a massive scheme that ended right where it ought to.
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### Author:  [@Dr.PI](https://forum.mustachianpost.com/u/Dr.PI)
#### Post date: [May 12, 2022, 9:54pm UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/65 "2022-05-12T21:54:06Z")
And now a hopefully related question. I am borrowing USDT to open leveraged crypto positions. If the price of USDT drops, nice for me, my loan is lower. But: is it possible to organize a short squeeze or whatever it’s called, by pushing the price of USDT much higher than 1 USD? Because if for example USDT goes up to 2 USD, my positions would be liquidated.
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### Author:  [@FIREstarter](https://forum.mustachianpost.com/u/FIREstarter)
#### Post date: [May 13, 2022, 5:09am UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/66 "2022-05-13T05:09:33Z")
First of all: I’m no expert on stablecoins. I can only tell you from what I know and read, plus connecting some missing dots from my gut feeling.
2nd: please don’t take my words as criticism or offense. I’m trying to be as kind as I can (doesn’t always work).
> [@Dr.PI](#):
>
> Because if for example USDT goes up to 2 USD, my positions would be liquidated
I’m pretty sure this is not possible (1 USDT = 2 USD). If it would be - everyone would immediately sell all his USDT positions to get double the amount of real US dollars. Which means USDT would drop like a stone. Yes, you might say “that’s what happened with UST”, but it’s a different story. UST dropped against USDT, not the real US dollar. On another note: there is no USDT/USD currency pair (at least on KuCoin and Binance - just quickly checked).
> [@Dr.PI](#):
>
> But: is it possible to organize a short squeeze or whatever it’s called, by pushing the price of USDT much higher than 1 USD?
Personally I don’t think that this scenario is possible. As said above: everyone would immediately sell all USDT to get a risk free 2x
> [@Dr.PI](#):
>
> I am borrowing USDT to open leveraged crypto positions. If the price of USDT drops, nice for me, my loan is lower
This is the part where I am worried. Yes, if the price of USDT drops, your loan is going to be lower. Please note that it will drop for pair like USDT/BTC or USDT/ETH or other crypto/crypto pairs. Another option would be USDT/EUR and USDT/CHF, if it’s a crypto/FIAT pair.
The part which is worrying me is that you are using leverage in crypto. This is something which can massively backfire. You have market makers on CEXs, you have crypto whales, you have all sorts of scams going on. So even if you pick the right coin and get your assumption correct, you can still get stopped out (assuming you are using SL/TP - which you **should** do if you are using leverage) by scam wicks etc. Leverage is something which is risky in traditional stock markets already. In crypto, it’s playing with fire next to a gasoline tank. Just take my words as a warning.
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### Author:  [@Patirou](https://forum.mustachianpost.com/u/Patirou)
#### Post date: [May 13, 2022, 6:09am UTC](https://forum.mustachianpost.com/t/crash-of-luna-and-ust/8401/67 "2022-05-13T06:09:01Z")
> [@nabalzbhf](#):
>
> As mentioned, those coins are sustained by confidence
wouldn’t that be true for every currency ? In most cases even the cash is worth less than the material inside. Even gold mining is only fueled by it’s perceived value, since industrial and jewellry needs could be covered by recycling at lower costs.
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