The global cryptocurrency market was thrown into chaos this year following the massive crash of the cryptocurrency TerraUSD and its sister asset Luna in May and the bankruptcy of the world’s third-largest digital asset exchange, FTX, in November.

TerraUSD and its sister token were developed by Singapore-based Terraform Labs, which was co-founded by South Koreans Do Kwon and Shin Hyun-seung in 2018.

TerraUSD, or UST, is the decentralized and algorithmic stablecoin of the Terra blockchain pegged to the U.S. dollar ​at a one-to-one value.

A UST token is created by destroying some of the sister token Luna to maintain the dollar peg.

In the event that the value of one UST falls to 80 cents, an investor can earn 20 cents if they exchange one Terra for a dollar’s worth of Luna, which does not have a fixed price.

UST and Luna saw rapid growth amid the perception that they were stable and profitable, with a market value topping 40 billion dollars at one point.

However, investors around the world began to dump the currency after the stablecoin slipped below its intended one-dollar peg on May 10. The drop and selloff also drove down the value of Luna, making the two currencies nearly worthless.

With the massive crash of TerraUSD and Luna, investors worldwide suffered dozens of trillions of won in losses and cryptocurrency prices plunged sharply.

Currently, South Korean prosecutors are looking into the crash and have requested that Interpol issue a Red Notice against Terraform Labs CEO Do Kwon.

Photo : YONHAP News

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