The Luna crypto crash of early May saw the Terra Luna crypto plummeting to an all-new low, crashing hard in terms of pricing, with its stablecoin, TerraUSD (UST) losing its peg.

At the time of publication, the Luna Classic price is up 27.3% and currently sits at $0.00009534. At the same time, UST has also gained momentum and is up by 90% ($0.05822) in the last 24 hours.

So, while a Luna recovery plan is now ongoing via Luna 2.0, what caused the Luna and TerraUSD prices to first plummet?

What Happened to Terra LUNA

The Luna crypto crash comes from its link to TerraUSD (UST), the algorithmic stablecoin of the Terra ecosystem.

UST is an algorithmic stablecoin and is operated via computer codes that help maintain its price equilibrium. The process involves burning or minting LUNA/UST to maintain the price of these tokens.

When a UST is minted, $1 of Luna is burned, while this also happens the other way around for Luna minting and UST burning. As UST threatens to go below its peg, holders will sell their UST (or burn it) for $1 of Luna, making a slight profit. This is until UST rises above $1, when the opposite encouragement happens.

After a large amount of UST was dumped, the stablecoin started to depeg. More UST was sold in a mass panic, minting more Luna and increasing the Luna circulating supply. This had the knock-on effect of then crashing the price of Luna.

This circulating supply inflation has drastically increased since the crash. Previously, the circulating supply sat at around 345 million Luna. On May 12, it was 3.47 billion Luna, according to analytics data. As of June 27, it was now 6,554.41B LUNC, where it remained ever since. Luna burns attemped to reduce this circulating supply.

The Luna Foundation Guard (LFG) had been purchasing Bitcoin to save UST from depegging. However, the practice did not work amidst the gradual crypto meltdown.

Luna Crypto Crash: The Aftermath

Following the crash, several crypto exchanges such as Binance delisted Luna and UST pairings. Trading suspensions were also prevalent in the lead-up to the weekend. A Luna Coinbase listing, previously set for launch by the end of June, has also quietly been pulled.

Luna's Do Kwon published a recovery plan for Luna, which seemed to have a temporary effect on the overall sentiment. Luna briefly rose to $4.46, before dropping below the $1 mark once again. It has since plummeted below 1 cent.

Dropping to new lows, Luna has now been abandoned, with Terra launching a new chain and new coin - Luna 2.0. The recovery chances remain up-for-debate, with the Luna 2.0 price remaining volatile.

Meanwhile, Luna Classic remains as the old chain and old coin. Meanwhile, there's also talk of a UST 2.0, too.

The next step for Luna will be to regain its original market cap, but this still seems quite far off, given its market cap is now $1.5 billion.

Luna Crash's Impact On Crypto Market

The Terra Luna crypto crash seems to be both a symptom and instigator of some of these major cryptocurrency price drops.

After the Luna Foundation Guard and Do Kwon purchased around $3 billion worth of BTC, the success of the Terra ecosystem became more linked to the wider cryptocurrency market through Bitcoin.

With the LFG and other market makers having to sell these Bitcoin reserves in an attempt to stop the UST depegging, this had a ripple effect on the wider market, seeing Bitcoin drop below the $30,000 mark. LFG revealed it sold over 80,000 Bitcoin in an effort to do so.

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Earning Solutions

LUNA Crypto; What happened

The Luna crypto crash of early May saw the Terra Luna crypto plummeting to an all-new low, crashing hard in terms of pricing, with its stablecoin, TerraUSD (UST) losing its peg.

What Happened to Terra LUNA

Luna Crypto Crash: The Aftermath

Luna Crash's Impact On Crypto Market

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