The cryptocurrency market was recently reminded of the Terra (LUNA +0.69%) chaos when a real-world asset (RWA) project, Mantra's OM token (OM -40.95%), plummeted 90% in value within hours without any catalyst.

In the case of Mantra, the market is accusing the project team of a rug pull scam, which its co-founder has addressed by saying, “We are here and not going anywhere.” He ascribed the crash to “reckless forced closures initiated by centralized exchanges.”

The cryptocurrency market was recently reminded of the Terra (LUNA +0.69%) chaos when a real-world asset (RWA) project, Mantra’s OM token (OM -40.95%), plummeted 90% in value within hours without any catalyst.

MANTRA USD (OM -40.95%)

In the case of Mantra, the market is accusing the project team of a rug pull scam, which its co-founder has addressed by saying, “We are here and not going anywhere.” He ascribed the crash to “reckless forced closures initiated by centralized exchanges.”

While these comments seem to have soothed the community concerns, for now, as can be seen in the price bounce, even the 200% spike in OM price is eerily similar to what LUNA witnessed after its 99% crash in May 2022.

Post-crash, LUNA saw a brief recovery but couldn’t reclaim its key price levels, which then triggered a more intense and longer downtrend.

It’s been nearly three years since the UST depegged and Luna plunged, but the market has yet to forget the chaos and collapse that ensued in the days, months, and even years following that.

Interestingly, a new study has discovered something new about the Terra saga. But before we get into that, let’s go back and take a brief look at the history!

The Rise and Fall of Terra (LUNA)

While it only took a few days in May 2022 for the Terra network to crumble into nothing, the story of the project started several years before that. It actually began during the bear market prior to the recent one caused, in part, by Terra itself.

In Jan. 2018, Do Kwon co-founded the Terra network with plans to develop an e-commerce payments application Chai, and a stable cryptocurrency to facilitate transactions. During this year, Terraform Labs was incorporated in Singapore. The firm was responsible for the development of the Terra blockchain.

In 2018, the firm held an initial coin offering (ICO) for LUNA. It was sold for $0.80 per token and raised $62 million. 

Terra actually had multiple funding rounds, including a pre-seed round, a seed round, a private sale, and a venture round. As for its investors, that included Binance Labs, Jump Crypto, Galaxy, Hashed, Pantera Capital, Polychain Capital, Arrington XRP Capital, Coinbase Ventures, Huobi Ventures, OKX Ventures, Hashed, and others, according to ICO Drops.

In 2020, Nicholas Platt, the head of research at Terra, introduced Anchor, a decentralized platform built on Terra for investors to earn a high yield on their deposits and borrow against their crypto holdings. 

In Sept. 2020, the algorithmic stablecoin USDT (USDT +0.04%) was publicly announced. During the bull market that followed, LUNA’s price went on to hit a record, surpassing $90 in Dec. 2021.

Then came 2022, in its first two months, Do Kwon launched the Luna Foundation Guard (LFG) which was “mandated to build reserves” to support the $UST peg as well as allocate resources for the ecosystem’s development through grants. The organization raised $1 bln by selling LUNA tokens to Jump Crypto and Three Arrows Capital among others. 

The funding was to buy Bitcoin (BTC +1.34%) for UST’s reserve system and as the firm purchased BTC, LUNA’s price rallied and went above $106 in late March.

During this same month, crypto trader GiganticRebirth (GCR) bet $10 million that the price of LUNA will be below $88 by March of next year.

As LFG continued to buy BTC, LUNA kept on surging, hitting $119 in early April. Before the month ended, UST became the third-largest stablecoin, and LUNA’s circulating supply hit its lowest at 346 million as LUNA tokens were burned to keep up with the rising demand for UST. 

Then came May, and with that, early signs of panic started to emerge. As the market started to see capital moving out of UST, with people dumping their UST on Anchor and Curve, it lost the peg with value dropping to $0.985.

As deposits continued to decline, UST struggled to recover to $1. On May 9, the value of UST plunged to $0.35, and Do Kwon made his infamous tweet: “Deploying more capital – steady lads.” The attempts to save UST’s peg sent LFG’s BTC reserve from around 80,000 BTC to just 313 BTC.

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