“I Love Chaos” – one of the many that has aged badly tweets by Terra founder Do Kwon, which he released on May 8th. In the meantime it is becoming increasingly clear: Terra itself is sinking into chaos. Whether Do Kwon meant that with his tweet is just as questionable as the rebirth of Terra. So far, every rescue measure has been in vain. The stablecoin UST – worth exactly one US dollar according to the idea – is currently trading at ten cents. LUNA not even close to a dime anymore.
Terra stuck in the “Death Spiral”
What can be observed at Terra at the moment is the typical pattern of a “death spiral”: Any attempt to stabilize the ecosystem ends in even more chaos. In order to slow down the sale of UST and thus push the price up again, the LUNA circulation quantity is currently being increased so drastically that it completely dilutes the value of the token. At the beginning of the week, the supply was 340 million LUNA. According to the analysis service Messari, it is now lying at 6,5 billion.
The tight mesh between the token LUNA and the stablecoin UST, which provided the mechanics for a month-long uptrend, is now becoming a problem. The algorithmic stablecoin system Terra is not designed for the scenario of a market crash. It takes growth. When the sell-off began, the house of cards began to collapse – with far-reaching consequences for the entire ecosystem based on Terra. Since Monday alone, the total value has been locked, according to data from defillama from 23 billion to currently 515 million US dollars.
History repeats itself
Massive price fluctuations are not uncommon on the crypto market, and the failed stablecoin is not an isolated case. In 2016, the stablecoin NuBits (USNBT), which was also algorithmically secured, suffered the same fate as UST today. NuBits did not recover from the price drop. After a brief comeback, it collapsed completely in 2018. Today is NuBits history.
It reads almost anticipatory another tweet from Do Kwon from May 8th – a few days before the Terra collapse. “I wonder what baby Luna will think about my shit posts 18 years later”. Good question. You don’t have to be 18 years old to get a feel for the Terra community.
Between total loss and existential fears
Comments from disappointed and desperate Terra investors are piling up on social channels. Quite a few report financial ruin. Unlike “naturally” stumbling cryptocurrencies, which experience has shown can recover, the value of LUNA has completely evaporated in time lapse. The dilemma: no matter whether you sell now or wait and fear, in the end the total loss should be sealed one way or the other.
The displeasure of many investors is therefore understandable. On Station.Terra, a governance vote is already underway on whether Do Kwon should go to jail. A cynical vote that should capture the mood of many who were cheated on Terra. It only becomes dangerous when the Internet bubble mobilizes in reality. According to media reports, Do Kwon is already at his apartment stalked been.
But Do Kwon is also partly to blame for the anger directed against the Terra founder. Just with public comments on Twitter, which are now coming back like a boomerang. Viral is currently going in interview excerpt, which was recorded a few days ago, in which Do Kwon explains with a smug smile that “95 percent” of all coins “die”. After a short pause, he adds: “But it’s also entertaining to see companies die”.
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