The Terra / Luna / UST collapse keeps on generating headlines. This time, we’ll use the data in ARK’s “The Bitcoin Monthly” report to establish its impact on the bitcoin ecosystem. Remember that the non-profit organization LFG, AKA as the Luna Foundation Guard, was accumulating BTC to defend UST’s peg to the dollar. In a then-delated May interview, Terra’s Do Kwon said that they were trying to get to $1B in BTC so that “besides Satoshi, we will be the largest single holder of Bitcoin in the world.” He also proclaimed, “within the crypto industry, the failure of UST is equivalent to the failure of crypto itself.”
Related Reading | Terra Beats Tesla As Second-Largest Corporate Bitcoin Holder After $1.5B Purchase
At one point, it appeared that BTC and UST destinies were inextricably linked, but the bitcoin network absorbed the collapse nearly unscathed. Let’s look at ARK’s numbers and try to figure out how it did it.
Terra, The Largest L-1 Blockchain Failure Ever
At this point, everybody knows what happened with Terra. Nobody knows how it happened, though. Was it a coordinated attack or did the natural market’s forces trigger the death spiral event? We wouldn’t know, but the fact of the matter is that the UST de-pegged from the dollar causing a bank run in the Anchor protocol, and the eventual demise of the algorithmic stablecoin and its twin, LUNA.
How big was the collapse? According to ARK’s report:
“In addition to causing the crash in UST and Luna, we believe Terra is the largest layer-1 blockchain failure in crypto history, wiping out a combined $60 billion of market capitalization between UST and Luna.”
Huge in size by any metric, but, how does it compare to previous crypto collapses? The only comparable collapse was “the Mt. Gox hack that stole 5.7% of total crypto market cap in 2014, Terra’s collapse destroyed roughly 2.7% of crypto’s total market capitalization.” The Mt. Gox hack almost destroyed the bitcoin…
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