In May 2022 $40 billion disappeared from crypto in 72 hours

This is the story of the Luna crash
And if you don't know what happened you need to read this
Luna had a stablecoin called UST
UST was supposed to be worth $1 always
But unlike USDC or USDT it wasn't backed by real money in a bank
It was backed by an algorithm and its sister token Luna
Here's how it worked:
To create 1 UST you had to burn $1 worth of Luna
To redeem 1 UST you could always swap it for $1 worth of Luna
The algorithm kept the price at $1 by balancing supply between UST and Luna
Sounds smart right? It was until it wasn't
A protocol called Anchor was offering 20% APY on UST deposits
20% on a "stablecoin"
People went crazy. Billions poured in
Your grandma could deposit UST and earn 20% doing nothing
At its peak over $14 billion was deposited in Anchor earning 20%
Now here's where it all falls apart
Someone dumped hundreds of millions of UST on the market at once
UST dropped from $1 to $0.98
People panicked and started redeeming UST for Luna
But redeeming UST means minting MORE Luna
More Luna being created = Luna price drops
Luna price dropping = each UST redemption creates even MORE Luna
More Luna = price drops further = more panic = more redemptions
This is called a death spiral
UST went from $1.00 to $0.10
Then to $0.01
Then to $0.00001
Luna went from $80 to $0.0001
$40 billion in value gone in 3 days
People lost their life savings. Their retirement funds. Their children's education money
Some people took out loans to deposit into Anchor for that 20% APY
They lost everything and still owed the loan
There were reports of people taking their own lives
All because they trusted a "stablecoin" that was backed by math instead of money
The founder Do Kwon tweeted
"deploying more capital - steady lads"
while people's savings were evaporating
He's now been arrested and facing charges in multiple countries