When was luna crash

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Last updated: April 17, 2026

Quick Answer: The Luna crash occurred in May 2022, when the TerraUSD (UST) stablecoin lost its peg to the US dollar, triggering a collapse in the value of Luna, its sister cryptocurrency. Within days, Luna's price plummeted from over $80 to less than $0.01, wiping out over $40 billion in market value.

Key Facts

Luna's crash began on May 7, 2022, when TerraUSD (UST) depegged from the $1.00 value.
On May 10, 2022, Luna’s price dropped from around $80 to under $1 within 72 hours.
The total market capitalization of Luna fell from over $40 billion to near zero.
More than 1.4 million Luna holders were affected globally.
The crash led to investigations by South Korean authorities into founder Do Kwon.

Overview

The collapse of Luna and its associated stablecoin TerraUSD (UST) in May 2022 marked one of the most dramatic failures in cryptocurrency history. Triggered by a loss of confidence in UST’s algorithmic pegging mechanism, the event caused a cascading crash that erased tens of billions in market value almost overnight.

The Terra blockchain, created by Do Kwon and his company Terraform Labs, relied on a complex algorithmic system to maintain UST’s $1.00 value. When that system failed under market pressure, both UST and Luna collapsed, sending shockwaves across the global crypto market.

May 7, 2022: TerraUSD (UST) began to depeg from $1.00, dropping to $0.97 amid large withdrawals from the Anchor Protocol, which offered a 20% yield on UST deposits.
May 9–10, 2022: UST fell below $0.30, triggering a hyperinflationary spiral in Luna as the protocol minted new tokens to restore the peg, increasing supply from 300 million to over 6.5 trillion.
Price collapse: Luna’s price crashed from over $80 to less than $0.01 within three days, representing a loss of more than 99.99% in value.
Market cap wipeout: The total market capitalization of Luna dropped from $40+ billion to under $100 million, wiping out nearly all investor equity.
Global impact: Over 1.4 million users lost access to funds, and major crypto exchanges like Binance and Coinbase suspended trading amid the chaos.

How It Works

Luna and TerraUSD operated on an algorithmic stablecoin model that used supply adjustments to maintain price stability. Unlike fiat-collateralized stablecoins like USDC, UST relied on a dual-token system with Luna to absorb volatility.

Burn Mechanism:When UST dropped below $1.00, users could burn $1 worth of Luna to mint 1 UST, reducing UST supply and theoretically pushing its price back up.
Mint Mechanism:When UST traded above $1.00, users could burn 1 UST to mint $1 worth of Luna, increasing Luna supply and reducing UST scarcity.
Staking Rewards: The Anchor Protocol offered a 20% annual yield on UST deposits, attracting over $14 billion in deposits and inflating demand artificially.
No Reserves: Unlike USDC or Tether, UST was not backed by cash or bonds, making it vulnerable to loss of confidence.
Hyperinflation Risk: As more Luna was minted to absorb UST sell-offs, the token’s value collapsed due to overwhelming supply.
Decentralized Governance: The Terra blockchain used Luna holders for voting, but rapid collapse prevented any coordinated emergency response.

Comparison at a Glance

Below is a comparison of Luna with other major cryptocurrencies and stablecoins before and after the crash:

Asset	Peg Type	Pre-Crash Price (May 2022)	Post-Crash Price (June 2022)	Market Cap Loss
Luna (LUNA)	Algorithmic	$86.53	$0.0001	99.99%
TerraUSD (UST)	Algorithmic	$1.00	$0.30	$18 billion
Bitcoin (BTC)	None	$39,000	$29,000	25%
USDC	Fiat-backed	$1.00	$1.00	0%
Ethereum (ETH)	None	$3,000	$1,800	40%

This table illustrates how algorithmic stablecoins like UST are inherently riskier than reserve-backed alternatives. While Bitcoin and Ethereum recovered over time, Luna and UST never regained their value, highlighting the fragility of uncollateralized systems under stress.

Why It Matters

The Luna crash had far-reaching consequences for investors, regulators, and the credibility of decentralized finance (DeFi). It exposed critical flaws in algorithmic stablecoin design and raised urgent questions about oversight in the crypto sector.

Investor losses: Over $40 billion in market value was erased, affecting retail and institutional investors globally.
Regulatory scrutiny: The U.S. SEC and South Korean authorities launched investigations into Terraform Labs and founder Do Kwon.
Market contagion: The crash contributed to the broader 2022 crypto winter, leading to bankruptcies at firms like Celsius and Three Arrows Capital.
Reputation damage: Trust in algorithmic stablecoins declined sharply, with many projects abandoning similar models.
Legal actions: Class-action lawsuits were filed in multiple countries, alleging fraud and misrepresentation by Terraform Labs.
Policy changes: Regulators accelerated efforts to classify stablecoins as securities and impose capital reserve requirements.

The collapse of Luna serves as a cautionary tale about the risks of untested financial models in high-growth environments. It underscores the need for transparency, regulatory clarity, and robust risk management in digital asset ecosystems.