How Luna Collapsed
It reminds me of bitconnect not to mention ust. Their stablecoin is still d pegged and at this point i think its safe to say its over for terraform labs. Theres. Simply no way to re establish the trust that algorithmic stablecoins need. I mean, after all, who wants an unstable stablecoin, so today were going to try to explain what happened and tell the story of why. I think this collapse was predictable. By that i mean it was literally predicted, there was a 20 million dollar bet about this and im also going to be honest with you about what we dont know as well, because before we move further, let me say loud and clear as of right now, no One knows the true culprit for this crash so far, ive counted four different and unique threads going viral all claiming to know how luna collapsed and the explanation is slightly different each time. But what is consistent is their proof is trust me bro. In fact, my personal favorite of these explanations is the theory that citadel whos, the gamestop super villain secretly gotten a hundred thousand bitcoin loan from gemini, which is owned by the winkle twins and they destroyed luna with it now jim and i denied these claims. But who are you gon na believe, a private company or an anonymous 4chan, post kind of a toss up right and im? Not even saying these are wrong. They just dont have any evidence so thats where it stands with this forensic side of things.
A lot of people claim to have solved it, but nobody seems to actually have done so. But while we dont know exactly what happened, i think its important to say this crash also didnt. Surprise. Anyone – and i think, thats worth talking about there were a lot of people who have been calling for this for some time, and these were mostly for two reasons which weve already discussed. Ust was built on a ponzi scheme and algos stable coins have sort of always failed and weve covered those but theres a third option that i really think has been overlooked in all this, and that is dokwans role. Remember that dokuan is the creator of terraform lapse and what most people dont know is that, as luna became more and more successful do kwan slowly became more and more arrogant. He would dismiss all his critics and call them poor, and i believe this played a role, at least in so many people rooting for lunas downfall, if not actively playing a role in it. As i said, we dont know if lunas demise was like an attack or naturally occurring, but i want to give you some examples of this, because i think we can learn from it about sort of what not to do if you suddenly happen to become ultra rich And powerful, so on november 25th 2021, a guy named freddy reynolds, proposed a theory of how you could crash luna with a soro style black wednesday attack by that hes.
Referring to when george soros broke the british pound – and he goes into great detail about how you could do this. If you just had a billion dollars on hand, he described a process where you could make 50 million dollars and sort of rinse and repeat it until luna falls apart now in response to this possible attack, vector does luna investigate. Does it implement strategies to defend itself? No instead dokwan says this probably the most thread. Ive read this decade. Silence is a perfectly acceptable option if stupid and then basically he asks sort of to be attacked. He says billionaires in my following: go ahead, see what happens i mean? Can you imagine the arrogance to taunt billionaires that are following you and going like yeah see what happens? Go ahead. Attack me see what happens now. Look, i know the internets kind of a wild place, but i usually think there are two rules to it that you have to abide by at all times: one dont ever taunt, the internet and two dont ever taunt billionaires – and you certainly dont want to do both At the same time, but this kind of arrogant response, wasnt even an irregular occurrence, rather than engaging with flaws in his protocol dokuan, would repeatedly call his critics poor. In fact, a few days before luna collapsed do kwan said that if you listen to crypto influencers about ustd pegging for the 69th time – or you could remember that theyre all poor now and go for a run instead, and he repeatedly did this – he also taunted this Guy al god trading, who said if luna breaks new all time highs, i will short it with size and do kwan responds yeah, but your size is not size.
This guy responds statistically youre dunking on 99 of your community, but all right someday. Your ponzi will collapse. You cant keep fueling anchor, and this is my favorite part of the story, because that same guy then responds four days later, offering a one million dollar bet that luna will be at a lower price in exactly one year now. What does dokwan do? He takes it, of course he takes the bait, he says cool im in and i guess that got enough attention, because someone noticed it and decided that they actually wanted to raise. The stakes. Gcr on twitter decides to offer a 10 million dollar bet. Dokwan once again agrees and they decide on the escrow being another crypto, twitter, user, kobe, and so right now, at this address, which we will put on screen theres. Currently, a 10 million dollar bet going on on the blockchain. This is real. Money were talking about um, literally just put up to see if lunas gon na fall or not, which obviously uh two months later. It did, but even that wasnt enough for gcr who at the time decides he wants to double the bet saying the initial spirit of it was this like yeah, your size is not size, whatever, like kind of a weird insult, weird way to say: youre, poor, basically, Um, and so he says, look were gon na play for big money, ill double it to 20 million dollars to which dokuan doesnt respond, and so instead, what this guy does is he decides hes going to short luna with the remaining 10 million dollars that he wanted To bet him with now for those of you following along at home, this is what we call a chad move.
This guy would end up cashing out with 16 to 20 million dollars profit and it shows how much dokuan pissed everyone off, not just the quote: poor people, but actually the richest part of crypto twitter. Remember. He literally asked billionaires to attack his protocol and to make it even worse, he also began attacking other competitors around this time. Saying about stable coins like die by my hand, die will die and it was sort of this unique combination of arrogance, antagonism and disregard for criticism that contributed either directly or indirectly to lunas collapse. People dont, like a sore winner and its fair, to say that do kwan had to learn that lesson the hard way. My point was sharing this isnt to suggest that the only reason luna collapsed is because this guy is kind of a jerk, because remember they were basically running a ponzi scheme, but being a jerk along with sort of running uh and benefiting from a ponzi scheme. Definitely doesnt help and the other bit of news we learned in all of this is that coindesk reported that do kwan was secretly behind a failed, stable coin in the past called basis cash. He turned out to be anonymously involved going by the pseudonym rick and his partner was called morty according to coindesk. He modeled the project after an earlier project called basis which you may or may not remember as the failed project of founder nader, al najji, the creator of bitcloud so thats, where we are with this story.
A lot has come out and while i hold very little sympathy for dokwans failure, i do feel bad for all the traitors who got swept up in it. For example, ksi claimed to have bought a hundred thousand luna claiming it could be the quote best or worst trade of my life. He later says he spent 2.8 million dollars buying the dip, and that is luna was now worth a thousand dollars. Ouch and thats. Not even to mention the regular investors who dont have millions to spare, i mean i cannot stress this enough. Billions of dollars have been wiped out overnight, like reddit communities are being makeshifted from supporters into support. Groups like i dont, want to show you guys too much of this, because it is dark. Some investors lost houses, others lost life, savings and thats truly sad, but we cant forget about the painful lessons. Things like luna can teach us in this case its sort of three things: dont taunt, internet billionaires, dont, build ponzi schemes and beware: algos stablecoins thats.