The Luna and UST crash has been the biggest collapse in the history of cryptocurrencies. While most of us might think that everyone faced losses, the truth is mostly the retailers got burned. A report from Jump crypto shows that large investors dumped Luna on retailers just before the crash. It seemed like they knew what was going to happen or at least had better anticipation of the crash. And like always, retailers being late to the party, got trapped.
The UST crash
As soon as the UST lost its peg slightly, large investors started to sell their holdings, but retailers continued to buy during the entire crash period. This was reported by Jump crypto, which was also involved in this collapse. The president of Jump, Kanav Kariya, is also a member of the Luna Foundation Guard; however, the company’s role is not clearly identified.
The report from Jump also said that some critical wallets that were huge played a big role in the crash as the dollar peg slipped. Some large investors exited the market around 7th May, but a lot of retailers bought in between 7th and 9th May. The outflows from Anchor protocol were also a lot and led to the crash.
It seems like because the large investors were so quick to jump the gun and get out when the peg slipped, the crash sped up. We should also note that while retailers bought in, their portfolio size was much less compared to the major investors. The trigger of the crash was the transaction of around $85 million on 7th May that depegged UST.
Luna and UST were tied together with an algorithm to back the value of the stablecoin. Investors can swap 1 UST for $1 worth of Luna at any time despite the market price. This led to a death spiral when the markets crashed. Investors bought UST for less than $1 and swapped them for Luna, which was worth $1, and then sold it again in the open market, pushing Luna’s price down. Then they continued to buy UST, swap it for even more Luna and sell the same again. This way, Luna’s supply became so massive that it is almost zero now.
What are your thoughts as reports show large investors dumped Luna on retailers? And do you think retailers can make profits in the crypto markets? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.