Whats the Root Cause of Terra LUNA’s and UST’s crashes? 

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What caused the Terra ecosystem meltdown?

Investors in cryptocurrency never imagined they would have to ask TerraUSD (UST), or LUNA if TerraUSD (UST), would reach $1. As the Terra ecosystem collapsed, Wednesday saw that question become the topic of conversation in cryptosphere.

Do Kwon, Terraform Labs founder, shared his rescue plan on Twitter after the dollar peg for algorithmic stablecoin UST fell to $0.30. CoinMarketCap reports that the sister token LUNA plunged to $0.84 at the same time. LUNA was once a top-10 cryptocurrency project according to market capitalization. For comparison, LUNA traded north of $120 in April.

Cointelegraph analysts Sam Bourgi and Jordan Finneseth, Marcel Pechman, and Benton Yuan hosted an emergency edition of “The Market Report” on Tuesday to discuss the situation.

Bourgi discussed the theoretical foundations of algorithmic stable coins, and why they are inherently risky. Then Bourgi examined how UST lost its peg. All the excitement around Luna Foundation Guard’s Bitcoin purchases (BTC)? Bourgi stated that this was one of the most alarming signs.

Finneseth explained the market psychology behind market crashes and why investors should expect more pain over the coming months. Yuan discussed various theories about who might have orchestrated the BTC dump that caused panic in Terra’s ecosystem.

Pechman, true to his word, placed the LUNA collapse in the context of global financial systems. He concluded that crypto and Bitcoin were still the best assets.

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