This sudden event has left many investors in disbelief, with a suicide hotline being pinned on the Terra Luna Reddit page. The crisis surrounding LUNA has instilled fear in people's hearts.

Meanwhile, the founder of Terra, Do Kwon, revealed a "rescue plan" earlier today aimed at rebuilding the ecosystem of the project. In a tweet, he acknowledged the past 72 hours had been challenging for the Terra community and expressed his desire to help it survive.

Kwon announced that he plans to work with the Terra community to "get through this crisis" and restore things to their previous state.

After UST stablecoin lost its peg to the US dollar, LUNA plummeted to $0.69, a drop of over 99% from its all-time high of $119. UST is designed to be pegged to the US dollar and allows holders to exchange 1 UST for 1 US dollar worth of LUNA. When UST experienced severe decoupling from the US dollar, massive selling pressure dragged down the price of LUNA.

Do Kwon first acknowledged the current failures and difficulties faced by the team. In essence, the decentralized stablecoin protocol, UST, has proposed a preliminary solution to its catastrophic situation with its peg to the US dollar. This process should strengthen the burning of UST, which has so far been ineffective in achieving parity with the US dollar. To allow UST to return to anchoring as much as possible, Do Kwon introduced a proposed community proposal, 1164, which reduces UST supply to restore pegging. The proposal will increase the Special Drawing Rights (SDR) in the base pool from $50 million to $100 million, reduce the Pool Recovery Block from 36 blocks to 18 blocks, and increase minting capacity from $293 million to $1.2 billion. Currently, Proposal 1164 has 100% approval rate.

He stated, "The only way forward is to absorb the stablecoin supplies that want to exit until UST returns back to anchoring."

About the mentioned proposal, one community member mentioned that this move may put further pressure on LUNA in the near future, but in the long run, it will strengthen the overall system, stating, "This allows for more efficient burning of UST and minting of LUNA, which will put pressure on the LUNA price in the short term but will be an effective way to stabilize the LUNA price while bringing UST back to its peg in the end."

The collapse of LUNA has caught the attention of internet users, investors, and cryptocurrency experts. There are rumors that Citadel Capital was involved in the collapse of UST. This hedge fund, which was involved in shorting GameStop in 2021, may have participated in shorting LUNA and the massive sell-off of UST starting this week. Reports suggest that Citadel borrowed 100,000 BTC and used it to short UST.

One popular theory is an "attack" on the Terra ecosystem inspired by George Soros, where buyers made over $800 million.

Ransu Salovaara, the CEO of Likvidi, responded to this theory, saying, "Some individuals chose the algorithmic peg of UST as a market manipulation target and used borrowed BTC en masse to execute it, some referred to it as the 'Soros-style' UST attack. It is estimated that the shorts made around $800 million in this event."

The "attack" has garnered mainstream attention, with U.S. Treasury Secretary Janet Yellen mentioning algorithmic stablecoins on Tuesday and highlighting the risks they pose. Economist Frances Coppola also considers the collapse of LUNA as an attack.

Ran NeuNer, the host of CNBC Crypto Trader and a "good friend" of Do Kwon, hinted that Citadel, a U.S. market maker, could be behind the "attack." This has sparked various rumors.

Despite Ken Griffin, the founder of Citadel Securities, openly expressing his dislike for the cryptocurrency industry and comparing the trillion-dollar market to abstract art, the claims about Citadel attacking UST are still speculative.

White hat hacker, Tree of Alpha, referred to LUNA's collapse as the "largest death spiral in the history of cryptocurrencies." Nic Carter from Castle Ventures also noted that it was the "most significant collapse in crypto history."

Investors have suffered significant losses. Finn Hatherell, an entrepreneur from Dublin running a media startup, entered the crypto space in 2020 after listening to Galaxy CEO Mike Novogratz talk about the benefits of Bitcoin on a podcast. A few months later, he noticed another tip from Novogratz on Twitter, suggesting that LUNA might be a good investment, so he bought it at less than $1. By Christmas 2021, his LUNA holdings were worth around 160,000 euros, a level that has remained until now. Hatherell said, "I had heard it could go to zero if the peg was attacked." Now, he has come to accept the likelihood of it going to zero.

A user named "Lunatic" reported a loss of $30,000, while another user named "Wicklidation" wrote, "I'm officially bankrupt, I'm losing my mind."

The headline post on the LUNA subreddit today is about a story of a person attempting suicide during the previous economic downturn. The user wrote, "If you are considering ending your life, I sincerely hope you reconsider how you feel. Whatever you're going through, this too shall pass. A brighter day will come, and life will open its doors for you."

Author: Amy Liu

This article is from Bitpush