The cryptocurrency market isn't pretty right now. Look anywhere and you'll see red: bitcoin and ether are both down over 30% week-over-week , hitting lows not seen since 2020, and altcoins like solana, dogecoin and cardano are faring even worse. It's bad news for crypto investors, but nothing unheard of. These are notoriously volatile assets reacting to tempestuous economic conditions .
What's much more unusual, and much more important, is the collapse of the luna cryptocurrency and its associated TerraUSD (UST) stablecoin. You may not have heard of UST before, or know what a stablecoin is, but it's a big deal. Billions of dollars in crypto wealth has been vaporized, sending shockwaves throughout the whole market.
There are two intertwined stories here: That of the UST stablecoin and that of luna, both of which are part of the Terra blockchain. The UST coin is designed to retain a value of one US dollar at all times, but depegged on Saturday and has since fallen to as low as 30 cents. Then there's luna, the centerpiece of Terra's ecosystem. Its value has collapsed in one of the most stunning crypto crashes ever recorded.
The coin's price fell from $116 in April to just a penny on Thursday. Its marketcap now stands at $641 million, down from a peak of over $40 billion.