Glossary
Terra / Luna Collapse
The May 2022 unwind of TerraUSD (UST) and Luna — an algorithmic-stablecoin design death-spiral that wiped out roughly $40 billion in market cap within a week.
TerraUSD (UST) was an algorithmic stablecoin backed by mint/burn arbitrage with the LUNA token: UST below $1 was burned to mint LUNA; LUNA above $1 was burned to mint UST. The mechanism worked in calm markets but was reflexive — when UST broke peg in May 2022, the death spiral expanded LUNA's supply from ~340M to ~6.5 trillion in days while UST traded to ~$0.10.
Total wipeout: ~$40 billion. Anchor Protocol (paying 20% APY on UST deposits) had concentrated retail exposure. The collapse catalyzed broader contagion through Celsius, 3AC, Voyager, and BlockFi. Founder Do Kwon was arrested in Montenegro in 2023.