The crypto world has been shaken this month after a diabolical hack on the Terra (LUNA) that decimated prices, knocking up to 30% off many major coins and fleecing $500 billion off the total  crypto market cap. In the wake of the hack, LUNA has now collapsed completely and its largest USD stablecoin project, UST, is worth only a fraction of a dollar. 

In other news, Coinbase is struggling to keep hold of customers and popular digital payments provider Wirex has added NFT functionality to its crypto wallet. It’s another exciting week in the world of cryptocurrencies!

Crypto News

Crypto Market Loses US$500 Billion in Two Weeks, Bitcoin Falls Below $30k

Bitcoin fell below the significant US$30k level in early May as a sell-off on global stocks began leaking over into the crypto market. A massive hack on the Terra (LUNA) stablecoin UST didn't help, driving more fear through the crypto market as UST lost its dollar pegged status.

Bitcoin has enjoyed a mild recovery since but the market still looks rocky as it only barely holds a position above US$30k. Some altcoins have fared even worse, with DOGE down 14% in the past week and Avalanche (AVAX) down a huge 19%.

Terra (LUNA) Crashes to Near Zero After Massive $800 million Hack

The stablecoin project Terra (LUNA) has flat-lined after a massive $800 million hack destabilised its largest platform, UST, forcing it to lose its dollar-pegged status. After an initial 85% drop, LUNA has fallen further and is now essentially worth nothing after hitting a high of $119 only one month ago. 

In the wake of the crash, Binance discontinued UST and LUNA withdrawals for approximately six hours “due to a high volume of pending withdrawal transactions”, adding that “this is caused by network slowness and congestion.”

Terra's Plan to Revive Luna After Historic Crypto Crash - CNET https://t.co/WJeVP0NA43

— David Papp (@DavidPapp) May 17, 2022

Coinbase User Assets Could be Liquidated in Event of Bankruptcy

Major US exchange Coinbase has added an SEC-required section to their terms of conditions stating: “In the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.”

In essence, this means that in the event of bankruptcy, assets held by users would be used to bail out the company. Although Coinbase CEO Brian Armstrong was quick to assure users that assets are safe, he noted that only Coinbase Prime and Custody customers have “strong legal protections in their terms of service that protect their assets.” Coinbase is down by 30% over the past week after reporting $430 million in net losses in Q1 of 2022.

Coinbase CEO says everything's OK after SEC filing gives netizens the jitters -- OK includes an outage, plummeting cryptocurrencies, falling stock price https://t.co/e6pgXfXT5s

— ZAQS Tech News (@ZaqsTech) May 16, 2022

Wirex Adds NFT Functionality to Wirex Wallet

The worldwide digital payments platform Wirex has added NFT functionality to its cryptocurrency wallet, Wirex Wallet. The new feature allows users to store NFTs from multiple blockchains on the wallet, making it easier to keep all their crypto assets in one place.

Wirex Wallet is a non-custodial crypto wallet and features a unique biometrics system with multi-party computation (MPC) for added security. CEO and Co-Founder of Wirex, Pavel Matveev, said "The addition of NFTs to the Wallet will connect NFTs to the real world and give added layers of security and trust like never before."

NEW features are dropping on #WirexWallet soon! I don't want to spill everything but if you've been ✨manifesting✨ NFTs, new top up methods, and want to save more on fees... you've got the right #defi wallet. pic.twitter.com/SET8APva5K

— Wirex (@wirexapp) May 13, 2022

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Terra LUNA - The Most Diabolical Hack in Crypto History?

The recent hack on Terra's UST stablecoin is one of the largest and most devastating hacks in crypto history. Not only did the hackers make off with a massive $800 million, but they managed to destabilise the entire crypto market after toppling UST's dollar-pegged status. The ripple effect of the hack was felt throughout the crypto market, dragging Bitcoin down by 25% and Ethereum by 30%.

1. After Luna bought up $1bn worth of BTC in March to back their UST reserves, they created a situation where liquidity (amount of reserves available for sale) would be low and therefore easier to manipulate. 
2. Then, after borrowing massive amounts of Bitcoin (100k), a hacker created a $4.2bn short position (betting the price of BTC will fall) and bought $1bn worth of UST. 
3. This knocked down UST's dollar-peg to about 99c, resulting in traders buying lots of UST to sell for $1 worth of LUNA, in what's known as arbitrage. 
4. However, Terra can only honour $100m worth of UST/LUNA sales in a day, so not all traders were compensated, and UST began to fall even further. 
5. In an attempt to shore up the collapsing UST price, Terra began selling massive amounts of their BTC reserves, resulting in a Bitcoin crash and the hacker getting paid out for their short position. 

If his assumptions are accurate, it was an incredibly genius yet diabolical hack that has left thousands of LUNA investors with worthless bags and millions of crypto investors with huge losses. While it’s certainly a negative outlook for crypto in the short term, hopefully the community will learn valuable lessons and Terra will come back with an even stronger blockchain platform.

As is common in crypto, it's difficult to prove exactly what happened, but the transparent nature of blockchain transactions helps to paint some kind of picture. Essentially, it seems a hacker set the entire thing up just to short Bitcoin and make a ton of money.

Twitter user OnChain Wizard (@OnChainWizard) goes into more detail in a tweet speculating that the crash resulted from a series of unfortunate events that were cleverly manipulated by a genius hacker. The main points are: