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Terra blockchain’s stablecoin UST lost the peg this week, crashed and brought the whole cryptocurrency market into a catastrophe long unseen.

Billions were wiped out of the digital asset market during the past 24 hours, while Terra’s native governance coin LUNA lost 99% of its value and nosedived from $24.14 to $0.1538 over the same time period.

What happened?

To better understand the collapse of LUNA, it is important to know its relation with blockchain’s stablecoin TerraUSD (UST). Both coins are created and guided by Terraform Labs and its co-founder and CEO Do Kwon.

TerraUSD (UST) is a decentralized algorithmic stablecoin, pegged 1:1 with the United States dollar. However, it is not backed by the dollar or any other fiat currency or commodity. Instead, UST relies on a smart contract algorithm that involves LUNA and helps to keep the UST value stable.

The algorithm tracks the demand for the TerraUSD (UST) and adjusts its supply accordingly to keep the value around $1. If the supply increases and the value of UST drops, the algorithm incentivizes users to burn UST to mint new LUNA coins and vice versa.

Do Kwon and his Luna Foundation Guard declared plans to back their algorithmic stablecoins with Bitcoin and thus have been accumulating their Bitcoin holding intensely. During the past few weeks, LFG bought over $3.5 billion worth of the dominant crypto. The situation drastically changed on Sunday, May 8. The stablecoin UST started to go down in cascades, losing 70% of its value and dropping to an all-time low of $0.029 on Wednesday.

To keep the price of UST as stable as possible, Terra’s algorithm initiated UST token burnings in exchange for the newly minted LUNA coins. The supply shock triggered the LUNA price fall, and the panic sales did the rest.

Where did it all start?

However, for any more visible price move to happen, there must be an initial source that triggers it.

Rumors on crypto social media went wild, claiming that the world’s biggest asset manager BlackRock (NYSE:BLK) as well as Citadel Securities could be behind the collapse of TerraUSD and LUNA.

Supposedly both whales manipulated the market and Terra’s Do Kwon to dump the price of Bitcoi