His stardom reached its peak as the price of luna skyrocketed to over $119 early last month, becoming the first Korean-developed cryptocurrency to crack the top 10 list of cryptocurrencies with the highest market capitalization in the world. Some investors and industry insiders even called him the “Korean Elon Musk” in pure admiration of his early success, but also for his outspoken comments that often stirred up debate on Twitter. The 30-year-old computer engineer-turned-CEO, however, has found himself under siege by angry investors and market regulators, as over $37 billion (47 trillion won) vanished from the market caps of two Korean-made cryptocurrencies – terraUSD, also known as UST and its sister token luna — over the course of a week.
According to cryptocurrency data platform CoinGecko, the total market cap of terraUSD and luna marked $3 billion as of 11:00 a.m., down 92.5 percent from $40 billion on May 9.
TerraUSD, a so-called “stablecoin,” which is intended to maintain a one-to-one peg with the US dollar through a set of algorithms, was traded at $0.16 as of 11:00 a.m.
The way that the two cryptocurrencies worked was if the price of UST fell below $1, investors could deposit UST at Terraform Labs and receive $1 worth of luna to earn profits of up to 20 percent in return. In this case, the distribution volume of UST gets reduced to allow the price to go back up to $1.
Kwon appears to have known about the collapse of the coins.
In an interview with chess streamer Alexandra Botez in early May, Kwon said 95 percent of crypto startups are “going to die,” adding that “There‘s also entertainment in watching companies die, too.”
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The graph shows the falling market cap of luna from May 9 to 16 (Screenshot of CoinGecko)
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The tumbling price of UST led to rushed sell-offs of luna, creating a “death spiral” situation that could wipe out the faith of investors altogether.
Kwon apologized on his Twitter account on Saturday, saying that he is “heartbroken about the pain” caused by his invention.
“I’m sure our community will form consensus around the best path forward for itself, and find a way to rise again,” he added, referring to his revival plan posted on terra’s agora website.
He proposed that the network ownership of the cryptocurrencies should reset to 1 billion tokens, which will be redistributed among UST and luna holders as well as the community pool.
Billy Markus, co-creator of Dogecoin, denounced Kwon and replied in his tweet that the Korean CEO should “stop trying to bring in new victims” and leave the crypto industry forever.
With the prices of UST and luna in a free fall, Korean crypto exchanges including Bithumb and Upbit have announced their decisions to delist luna.
Although Korean financial authorities on Sunday decided to carry out emergency checkups to monitor the crash of the cryptocurrencies, there are no immediate actions they can take other than warning crypto investors due to the absence of legal grounds.
In the case of stock market, the country’s financial authorities can legally open investigations on suspicious changes in the share price of a certain company and supervise it. But currently, there are no such laws for the crypto market.
The collapse of UST and luna sparked discussions on President Yoon’s pledge to enact a basic digital assets law as it could provide a legal basis for financial authorities to oversee the crypto market and protect investors.
“We still have a long way to go as related parties — such as government ministries and lawmakers at the National Assembly — must talk about what will be included in the law,” an official at the Financial Services Commission said.
By Kan Hyeong-woo ([email protected])