Going ‘To Zero’—Panic Is Sweeping Crypto Markets, Hitting The Price Of Bitcoin, Ethereum, BNB, XRP, Cardano, Solana, Terra’s Luna And Avalanche

May 11, 2022

Bitcoin and cryptocurrency markets have fallen sharply after the controversial algorithmic stablecoin TerraUSD (UST) dropped further from its dollar peg (following a serious "ripple" warning this week).

The bitcoin price has dipped back toward $30,000 per bitcoin after plunging under the closely-watched level earlier this week. Ethereum and its major rivals BNB, solana, cardano and avalanche have also crashed. Solana and avalanche are leading the major market lower with a 10% and 20% decline respectively.

Terra's luna, a cryptocurrency designed to support UST's one-to-one peg with the U.S. dollar, has lost almost 90% of its value over the last week as traders offload the cryptocurrency.

"Crypto markets have been under pressure given macro events (tighter monetary policy, surging inflation, Russia’s invasion of Ukraine) and the correlation between bitcoin and global equities is high," Jaime Baeza, the chief executive of Miami-based crypto hedge fund ANB Investments, said in emailed comments. "However, the most recent fall in crypto prices is more due to the de-peg of the UST."

UST, which was the biggest algorithmic stablecoin by market value, had a market capitalization of around $18 billion last week. It started to lose its peg to the dollar on Saturday, and on Monday traded as low as 60 cents. This morning it has dipped to around 30 cents.

The Luna Foundation Guard, a group created to support the UST dollar peg, has said it will defend its price by selling its $3 billion bitcoin reserves.

"This accelerated the selloff of the broader crypto market as panic spread, and a more black swan systemic-risk event loomed closer," Baeza said.

UST is designed so traders can exchange 1 UST for $1 worth of luna, no matter the price of UST. The Luna Foundation Guard was in the process of building up a $10 billion bitcoin-based crypto reserve when the crash happened.

Do Kown, the creator of UST and luna developer Terra Labs, has promised another bailout is imminent. On Tuesday, Kwon said he was "getting close" to "announcing a recovery plan for UST," helping the price to rally but it has since fallen back.

"With the [UST] peg gone, luna will go to zero by design (as arbitrageurs buy UST and sell luna) unless parity and trust are restored, which can only be done by means of a significant cash infusion and changes in the protocol," trader Alex Krüger posted to Twitter.

UST began to lose its dollar peg last week amid a broader asset crash that hit bitcoin, crypto prices, including luna, and stock markets. Some have speculated a seller was flooding the market with UST over the weekend to attack the stablecoin.

Meanwhile, around $5 billion worth of UST was drained out of the luna-based decentralized finance lending application Anchor.

UST’s Do Kwon Was Behind Earlier Failed Stablecoin, Ex-Terra Colleagues Say

May 11, 2022

Do Kwon, the CEO of Terra creator Terraform Labs, was one of the pseudonymous co-founders behind the failed algorithmic stablecoin Basis Cash, CoinDesk has learned.

Basis Cash (BAC) was a closely watched revival in decentralized finance (DeFi) circles when it launched on Ethereum in late 2020, just before the launch of terraUSD (UST), Terra’s flagship stablecoin. Like UST, BAC sought to maintain a $1 peg through code, not collateral.

But it failed: The token of this long-abandoned project never achieved its target of dollar parity, sank below $1 in early 2021 and was trading well below 1 cent on Wednesday. Now history appears to be repeating: Over the last three days, UST sank precipitously below its peg, going as low as 27 cents in early morning U.S. hours Wednesday.

UST’s depegging has shocked crypto markets and regulators alike as the once-$15 billion stablecoin has continued its downward spiral. While BAC’s $54.5 million footprint was far smaller in impact, it offers a historical data point for observers grappling with the feasibility of algorithmic stablecoins.


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When Floyd Mayweather started touting an obscure NFT project on Twitter this year, Tyler jumped at the investment opportunity.

Mayweather, a boxing legend, had already served as Tyler’s “biggest inspiration” in his martial arts training. But Tyler was also looking for investment opportunities and figured Mayweather, who often calls himself “Money May,” was worth listening to.

“What I need everybody to do right now: Go get a Bored Bunny NFT,” said Mayweather, dressed in a Louis Vuitton vest with a diamond bracelet, a necklace and a gold watch. “You’re hearing it from the one and only Floyd ‘Make-That-Money’ Mayweather.”

Tyler, 35, a property manager whose family runs a small Miami-based trucking company, said he put together about $12,000 with the help of his mother and bought the nonfungible tokens, or NFTs, digital tokens that convey ownership of digital images. In this case, the project was a series of images of rabbits similar in nature to the popular Bored Ape Yacht Club images that helped fuel a boom in NFT art projects.

Those NFTs are now worth far less than Tyler paid.

“This basically financially crippled me,” said Tyler, who asked to be identified by only his first name because he fears online trolls who ridicule unsuccessful NFT investors. Now, especially with inflation, Tyler said, he is struggling to afford gas for his car and groceries to eat. He said he feels Mayweather and the other promoters “took their payouts and moved on while everybody who scraped by to invest in their futures got robbed.”

The Bored Bunny team promised in its marketing materials that buyers could make “2x, 5x, maybe even 10x the value of [their] investment,”but the value of the NFTs attached to the images nose-dived after a brief spike and has yet to recover. The floor price of a Bored Bunny NFT now sits at 0.05 ethereum(currently $104.09), down from its mint price of 0.4 ethereum(about $1,504.54 at the time).

It’s a pattern that crypto critics, watchdogs and even some influencers point to as an ongoing problem: digital investments riding a wave of NFT enthusiasm and backed by high-profile endorsements that quickly lose value. In some cases, in the crypto world, it’s what’s known as a “rug pull.” But more broadly, ad transparency experts warn,public figures are promoting NFTs often without having done due diligence or warning their fans about the serious financial risks.

Bored Bunny’s founders, who declined to provide their real names, denied any wrongdoing. Mayweather’s publicist declined to comment.

Droves of celebrities and influencers have leaped at the chance to shill NFTs to their fans. Many of them don’t disclose that they were paid to do so and don’t acknowledge (or, in some cases, they actively downplay) the serious financial risks involved, said Bonnie Patten, the executive director of the consumer advocacy group Truth in Advertising.

“The messaging from these celebrities is like the 21st century equivalent of ‘Let them eat cake,’” Patten said. Mixing the “incredibly volatile” NFT economy and the “Wild West” of influencer marketing, she warned, is a surefire recipe for disaster. “It has the potential to financially wreck vulnerable people who look up to them.”

The multibillion-dollar influencer marketing industry has long been notoriously greedy, with online stars urging their followers to buy potentially dangerous weight-loss products to snake-oil wellness remedies. But the frenzied shilling of NFTs has raised the stakes to such extremes that in place of effective regulation, influencers and some celebrities have started calling out one another’s behavior.

Richard Bengtson, the founder of FaZe Clan, who’s known as FaZe Banks, tweeted screenshots of alleged messages from the Bored Bunny team offering him $500,000 to $750,000 to post about their NFTs. He said he “didn’t make this mistake” because he’d “taken the time to educate myself.”

FaZe Clan didn’t reply to requests for comment. Bored Bunny declined to confirm how much it paid its “commercial partners,” citing a confidentiality agreement.

Bored Bunny said in written direct messages that the team is “actively working on making this project great” but that it is “not responsible for investors not selling” at the optimal time. It said its team had received death threats from angry Bored Bunny buyers, leading it to cut off communication with the community, and that it is developing initiatives “to grow the project to the best of our ability.”

UST’s Do Kwon Was Behind Earlier Failed Stablecoin, Ex-Terra Colleagues Say

May 11, 2022

Do Kwon, the CEO of Terra creator Terraform Labs, was one of the pseudonymous co-founders behind the failed algorithmic stablecoin Basis Cash, CoinDesk has learned.

Luna Crypto Crash: How UST Broke and What's Next for Terra

May 25, 2022

The cryptocurrency market is brutal right now: Look in any direction and you'll see red charts. Bitcoin has ended up in the red for eight consecutive weeks, a record for the cryptocurrency, and ether is at its lower point since 2020. While it's painful for crypto investors, this dive isn't entirely unprecedented. Cryptocurrencies are infamous for their volatility, and tempestuous economic conditions are bringing down not just crypto, but the stock market too.

What is unprecedented, however, is the collapse of the luna cryptocurrency and its associated terraUSD stablecoin, aka UST. 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 have been vaporized, sending shockwaves throughout the whole market.

Do Kwon’s proposal for a Terra blockchain ‘rebirth’ just passed by 65%. Here’s what that means, and what happens next

May 25, 2022

A vote to create a newTerra blockchain passed early Wednesday morning by a wide margin after the recent collapse of the chain’s signature cryptocurrencies, Luna and the stablecoin UST.

The vote was approved by an overwhelming margin of 65.5% yes to 13.2% no with veto, with 200,403,090 votes in favor and 40,374,458 votes against. A significant percentage of votes, 20.98% or 64,192,319 votes were to abstain.

The original proposal suggested a “hard fork” that would split the blockchain in two, but was later amended. The result opens the door to restarting the Terra blockchain, which hosts the two nearly worthless cryptocurrencies after a “depeg” event of UST two weeks ago led to a broad selloff of the token that brought UST down to cents on the dollar and its sister cryptocurrency Luna down 97% in 24 hours. Creating a new blockchain would let applications that were hosted on the old Terra blockchain migrate to the new one instead of having to rework their projects.

As part of the plan, millions of Luna tokens will be distributed to supporters with the hopes that they will be worth something once people adopt the new blockchain.

The vote was open to Luna token holders; one Luna cryptocurrency was equal to one vote. Though it’s not clear what will happen now that the proposal for a new blockchain has been approved, a yes vote is the only way that many holders of UST and Luna have a chance to recoup any of their losses. A no vote would have effectively kept those currencies worthless.

The vote about whether or not to create a new Terra blockchain, which was first proposed by Terraform Labs CEO Do Kwon on May 18 would among other things ditch the stablecoin UST and solely use UST’s sister cryptocurrency, Luna, for applications and projects based on the new blockchain.

As part of the proposal, the old blockchain, renamed “Terra Classic,” would still technically exist and host the defunct UST. But the applications built on the old blockchain along with the people and organizations validating the transactions would likely move to the new blockchain.

The new blockchain would be created on May 27 for any future Terra blockchain-based applications and projects.

"We’re inspired to see the Terra community’s energy and enthusiasm for our ecosystem revival plan. With hundreds of developers working on everything from DeFi to fungible labor markets, state-of-the-art infrastructure, and community experience, this ecosystem was important to preserve, and today we have done that together," a Terraform Labs spokesperson said in a statement to Fortune.

When he first made the proposal to start Terra anew, Do Kwon said in a tweet that he had broad support, pointing to a list of 15 Terra “builders” who created applications on the Terra blockchain and who he said were in his corner.

Still, before the official vote, 92% of voters in an online poll of 6,220 on May 16 said they would vote no. This was before Kwon’s proposal was officially live and before he made changes to the original proposal.

Kwon faced significant controversy after he amended the proposal on May 20 after many had already voted for the original. The amendment changed the number of tokens that would be distributed to existing Luna token holders and investors that bought Luna after its collapse. Many complained that the change was unfair to those that had already voted and were not constantly checking the proposal for changes.

After Kwon amended the original proposal, Figment, which validated transactions on the Terra blockchain and has 1.5% voting power because of the Luna tokens it holds, pointed to Kwon amending the proposal as a reason for it to vote no.

“A proposal should not be a “living document” when it is actively being voted on. We believe this is bad governance and goes against basic principles,” said Figment in a blog post explaining its no vote.

This case concerns insider trading in NFTs on OpenSea, the largest online marketplace for the purchase and sale of NFTs. In violation of the duties of trust and confidence he owed to his employer, OpenSea, CHASTAIN exploited his advanced knowledge of what NFTs would be featured on OpenSea’s homepage for his personal financial gain.

As part of his employment, CHASTAIN was responsible for selecting NFTs to be featured on OpenSea’s homepage. OpenSea kept confidential the identity of featured NFTs until they appeared on its homepage. After an NFT was featured on OpenSea’s homepage, the price buyers were willing to pay for that NFT, and for other NFTs made by the same NFT creator, typically increased substantially.

From at least in or about June 2021 to at least in or about September 2021, CHASTAIN used OpenSea’s confidential business information about what NFTs were going to be featured on its homepage to secretly purchase dozens of NFTs shortly before they were featured. After those NFTs were featured on OpenSea, CHASTAIN sold them at profits of two- to five-times his initial purchase price. To conceal the fraud, CHASTAIN conducted these purchases and sales using anonymous digital currency wallets and anonymous accounts on OpenSea.

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CHASTAIN, 31, of New York, New York is charged with one count of wire fraud and one count of money laundering, each of which carries a maximum sentence of 20 years in prison.