• In May 2022, the crypto project Terra Luna experienced a catastrophic collapse.
• As a result of this crash, the price of LUNA plummeted and led to a global market crash.
• The Korean National Tax Service subsequently imposed $78.4 million in corporate and income tax on Do Kwon and other related parties.
The Catastrophic Collapse of Terra Luna
It has now been nearly ten months since the crypto project Terra Luna experienced a catastrophic collapse in May last year. Later, FTX collapsed and recently, the crypto-friendly Silicon Valley Bank (SVB) collapsed. As the SEC charged Terra founder Do Kwon with fraud over the $40 billion crypto crash, it has adversely affected the market. As there is hardly any positive news regarding its price movement, we cannot deny the fact that LUNA will never be considered a ’safe‘ cryptocurrency. Therefore, it may not be able to return to its former heights again.
The Impact of Stablecoins
Stablecoins, such as UST, were created to protect investors from the extreme price volatility of popular cryptocurrencies, such as Bitcoin (BTC). As fiat currency is pegged to reserves such as gold, a stablecoin is pegged to either a fiat currency (e.g. USD) or a supporting cryptocurrency. In this case, TerraUSD was pegged to Luna. But herein lies the conflict: A cryptocurrency isn’t equivalent to gold reserves. As LUNA prices got destabilized, it had an impact on UST prices too and caused an entire stablecoin system collapse in Q2 2022. The stablecoin project was aimed at complementing fiat currencies with decentralized models of cryptocurrencies but ended up doing more harm than good due to its lack of intrinsic value backing it up and decreased investor confidence following its failure in May 2022 when thousands of investors across the globe lost significant amounts due to this mishap..
LUNA Price Performance Before Its Collapse
LUNA was one of the market’s top performers once with altcoin being among top 10 cryptocurrencies by market value towards end 2021 before it suffered massive losses due to its sudden collapse in May 2022 along with other cryptos like FTX & SVB Bank which also went down due to similar circumstances .
Bloomberg Report Sheds Light On Further Developments
A Bloomberg report from May 2022 sheds light on further developments that transpired after LUNA’s fall from grace . It was early May 2022 when large investors started selling their tokens leading to huge drop in prices for both UST & LUNA , causing loss worth around $45 billion within week resulting into global crisis . To buy back these coins , leadership team behind Terra system planned buying Bitcoin reserves but unfortunately their plan didn’t work out .
Korean National Tax Service Imposed Taxes On Related Parties After Mishap
Afterwards , Korean National Tax Service imposed hefty corporate & income taxes worth $78 million on Do Kwon & other related parties associated with this mishap post which they decided not pursue further legal action against them .