Recipients of the refreshed Luna from Do Kwon blew up the token just hours after launch as they tried to recoup the losses caused by the devastating crash of the original currency earlier this month.
May 27 company Terraform Labs made a hard fork of its failed blockchain, giving rise to the so-called Luna 2.0. The original Luna has since been renamed Luna Classic (LUNAC).
However, many recipients disposed of their tokens at the first opportunity, causing the price of the tokens to drop by 70% from the initial price of $18,87. At the time of writing, the price was $9,32. And this despite the fact that users could only sell 30% of the promised coins.
Last week, Protos announced a delay in Terra payouts: 70% of traders' coins are subject to a two-year vesting period with a six-month break. Most likely, it was an unsuccessful attempt to prevent a massive sale, which Terra predicted, but which, nevertheless, happened.
The new LUNA tokens were distributed based on the size of the wallets before and after the crash, as well as taking into account those who burned out by betting on Anchor. Terra previously shared details on Luna's payout breakdown, clarifying that:
- 30% will be saved for the public pool,
- 35% will be received by the former owners of LUNA,
- 10% will be allocated to UST holders who placed Anchor bets before the crash,
- 10% will be transferred to the owners of LUNA after the collapse,
- 15% is for UST holders after the crash.
When Luna's relaunch was announced, it didn't take long for a number of well-known exchanges to declared their support and shared plans for the listing of the token after the launch. HitBTC and Huobi were among them, while Binance confirmed that it will partner with Terraform Labs to help users get compensated.
Subsequently, Binance announced a giveaway that would begin on Tuesday, May 31st, concurrent with the official listing of the token. This news caused the price of the coin to rise to $11,97 by Monday morning, however, despite this rise, as of press time, it is more than 50% below its starting price.
The Curve protocol is what started the fall
Despite various statements on social media about the responsibility of one entity, the cause of the collapse was most likely a small number of holders. Among them was the lending platform Celsius. The Nansen analytics platform has also identified the Curve protocol as the "zero point" for UST debinding. In a study published on May 27, the blockchain analytics firm stated that “the UST decoupling may have been the result of investment decisions by several well-funded entities.”
According to a Nansen research note, a struggle between the inflow and outflow of funds from UST began in early May, with a wallet linked to the Luna Foundation Guard (LFG) withdrawing 150 million UST from Curve. Then about 85 million UST from one newly created address was transferred to Curve. And four addresses, one of which is associated with Celsius, sent about 105 million UST to Curve.
In response, LFG and other peg-protecting wallets withdrew 189,6 million UST, a trend that continued into the next day. According to Bloomberg, two wallet addresses “significantly impacted the UST unbind,” and one of them was linked to Celsius.
Recipients withdrew approximately 420 million UST from Anchor in 15 transactions and used the Wormhole bridge to transfer funds to Ethereum. Nansen also called Celsius "a close counterparty that sent and received funds" from another wallet whose activity led to the loss of the peg.
