South Korea’s Terra dual currency plummets by more than a hundred dollars after the value “returns to zero” – BBC News

A few weeks before the cliff-like devaluation, Terra’s sister currency LUNA and the dollar-denominated UST had continued to rise.

The Terra blockchain platform on which LUNA coin is based was established by Do Kwon of South Korea in 2018, and the price has fluctuated below one dollar for the first two years after its issuance. It began to emerge in December 2021, and the currency price began to rise, from $5 to $116 in April this year, once close to $120, with a market value of $41 billion, ranking fifth among all cryptocurrencies.

After the LUNA coin, Terra issued another stable coin with a 1:1 benchmark against the US dollar, called UST. LUNA can be exchanged with UST, and launched a deposit application for this stable coin. Depositing UST on this Anchor can get 19.5% return (annualized return).

Such a generous return is very attractive, and because the virtual currencies issued by the two Terra platforms can be exchanged for each other, there are many speculative arbitrage transactions.

Most of UST was parked in high-yield Anchor, with little liquidity, and the currency price rally basically maintained for about a year, until an $84 million sell order appeared.

In fact, at the same time that the currency prices both took off, there have been doubts about whether this is a Ponzi scheme.

On May 8, Terra moved $150 million in UST to adjust liquidity, but 10 minutes later, a new address suddenly sold $84 million in UST, triggering a wave of selling and panic. On the day, UST prices stubbornly stuck at the 95 cents level, further fueling the sell-off.

The situation quickly got out of control. UST accelerated decoupling from the dollar, crashed on the 9th, and depreciated by 99% in 48 hours.

On May 17, the price of LUNA coin was almost zero.

Others in the virtual currency investment community were horrified and quickly retreated from other cryptocurrency markets, taking billions of dollars with them.

Kwon Dohyung, 30 years old, lives in Seoul and has always been shunned by the media. After the Terra dual currency crash, countless investors followed him on social media, asking him to come to the rescue.

An estimated 250,000 people have invested in Terra coins.

One of the investors, who went by the pseudonym Chancers, exhausted his patience in desperation. He searched for Quan’s address, went directly to the door to inquire, and broadcast the whole process live online, with about 100 people watching online.

Chancellor knocked on the door, and Kwon Doheng’s wife opened the door and told her husband that he was not at home. Soon, the police who rushed to the scene after hearing the news arrested Chancellor.

According to local media reports, Chancellor claimed that he did not know that unsolicited visits to people’s homes in Seoul to ask for dialogue would violate South Korean law, and that he had surrendered to the police.

Chancellor told BBC reporter Joe Tidy he was likely to face fines and a criminal record that could make his life difficult.

He said: “I lost a lot of money and I am now under police investigation. I was a civil servant in South Korea, and once I am convicted, I may not be able to return to the civil service.

“In Korean culture, it’s not so important in itself, what matters is that it caused a scandal. I even had to apologize publicly as a sinner. I didn’t know it would be this serious. It’s so sad.”

He accused Kwon of not communicating adequately with investors during and after the Terra coin crash. He now considers it a “hoax”.

Kwon Dohyung argued that neither he nor the company made a cent from the collapse of Terra coin.

On May 20, South Korean police announced an investigation into the Terra coin issuing company, Terraform Labs. Local media reported that the Joint Financial and Securities Crime Investigation Unit was tracking the whereabouts of LUNA and UST coins.

A week before Terra ended, Kwon Do-hyung declared on his YouTube cryptocurrency channel, “95% of cryptocurrencies will die — but it’s entertaining to watch companies die.”

Before LUNA and UST collapsed, he tweeted to his 1 million followers: “I love chaos.”

Over the next three days, he rolled out plan after plan to save the game in a series of tweets, calling on the Terra community to “persist”.

On May 13, Kwon Dohyung said the rescue failed, stating on Twitter: “My invention has caused pain to all of you and my heart is broken.”

He devised yet another controversial plan to resurrect Luna, drawing criticism from prominent figures in the crypto circle.

Changpeng Zhao, CEO of cryptocurrency exchange Binance, called the plan “wishful thinking.”

Billy Markus, co-founder of cryptocurrency Dogecoin, also sternly tweeted: “My advice is to stop luring new victims into the game to compensate previous victims and leave the circle forever.”

Neither Kwon nor Terraform Labs responded to the BBC’s request for comment.