Luna 2.0: It came, they sold, it tanked

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Recipients of Do Kwon’s revamped Luna reportedly tanked the token just hours after launch as they scrambled to recoup losses caused by the original currency’s devastating crash earlier this month.

On May 27, Terraform Labs hard forked its failed blockchain, giving birth to the so-called Luna 2.0. The original Luna has since been rebranded as Luna Classic (LUNAC).

However, many recipients flipped their tokens at the earliest possible opportunity, causing it to plummet 70% from its launch price of $18.87. At the time of writing, it stood at $9.32.

This is despite the fact that users could only sell 30% of their promised coins.

Last week, Protos reported Terra’s delayed payout process: 70% of traders’ coins would be subject to a two-year vesting period with a six-month cliff. This was likely a poor attempt to prevent the mass sell-off that Terra foresaw, but which occurred nonetheless.

The new LUNA tokens were dished out depending on the size of wallets pre- and post-crash, also taking into account those burned by staking with Anchor.

Terra previously shared details about the breakdown of Luna payments, specifying that:

  • 30% will be retained for the community pool.
  • 35% will go to pre-crash LUNA holders.
  • 10% will be set aside for pre-crash Anchor-staked UST holders.
  • 10% will be handed to post-crash LUNA holders.
  • 15% is earmarked for post-crash UST holders.

Read more: Crypto exchanges welcome Luna 2.0 but holders face two-year token wait

When Luna’s relaunch was announced, it didn’t take long for a number of prominent exchanges to pledge their support and share plans to list the token upon launch.

Among these were HitBTC and Huobi, while Binance confirmed that it would work with Terraform Labs to help users receive compensation.

Binance subsequently announced a multi-year airdrop, beginning on Tuesday, May 31, alongside its official listing of the token.

This news saw the struggling coin’s price rebound to $11.97 by 10:25 on Monday, however, despite this uptick it sits more than 50% down on its launch price, as of press time.

Curve protocol is where the de-pegging began

According to Nansen, despite various claims on social media about a single actor being responsible, a small number of holders likely caused the collapse. Among these was lending platform Celsius.

As reported by Bloomberg, Nansen also identified the Curve protocol as Ground Zero for UST’s de-pegging.

In research published on May 27, the blockchain analytics firm said that, “the de-peg of UST could instead have resulted from the investment decisions of several well-funded entities.”

According to Nansen’s research note, a back and forth battle between UST inflows and outflows clicked into gear in early May:

  • A wallet associated with the Luna Foundation Guard (LFG) withdrew 150 million UST from Curve.
  • About 85 million UST from one newly-created address was then moved into Curve.
  • Four addresses – one associated with Celsius – then sent Curve around 105 million UST.

The LFG and other “peg defending” wallets responded by withdrawing 189.6 million UST and this dynamic continued into the following day.

According to Nansen and as reported by Bloomberg, two wallet addresses “significantly impacted the UST de-peg” and one of these was associated with Celsius.

The addresses took out around 420 million UST from Anchor in 15 transactions, and used the Wormhole bridge to transfer the funds into Ethereum. Nansen also called Celsius “a close counterparty that has sent and received funds” from another wallet, the activities of which led to the de-pegging.

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