In the turbulent cryptocurrency market, the story of LUNC (formerly LUNA) and USTC (formerly UST) serves as a thought-provoking case. These two projects experienced a remarkable big dump in the second quarter of 2022, with LUNC falling from $119.7 to nearly zero, triggering a series of chain reactions, including the collapse of the well-known venture capital firm Three Arrows Capital.

The core issue of this collapse lies in the reserve mechanism of the USTC stablecoin. The project team failed to maintain sufficient dollar reserves to stabilize the price of USTC and instead overly relied on LUNC as the reserve asset. This flaw was exploited by market participants, leading to a large issuance of LUNC tokens in an attempt to maintain the dollar peg of USTC, ultimately causing the value of LUNC to drop to zero.

Recent developments show that Do Kwon, co-founder of Terraform Labs, pleaded guilty in federal court in New York on August 12, 2025, admitting to conspiracy to commit fraud and wire fraud. This incident undoubtedly casts a shadow over the project, making it difficult to regain market trust in the short term.

Despite this, LUNC and USTC seem to be trying to regain their footing. Some exchanges have implemented a fee burning policy in an attempt to reduce the supply of tokens. However, there are still significant challenges to restoring their previous value levels.

In the long run, this project indeed has certain potential. The continuous support from major exchanges provides it with a lifeline. However, investors need a great deal of patience, and it may take several years or even longer to see significant returns.

It is worth noting that investing in mainstream encryption currencies may be a more robust choice than holding such controversial tokens for the long term. In any case, it is always necessary to remain cautious when investing in the encryption currency market and to fully recognize its high-risk nature.

The cryptocurrency market is constantly changing, and investors should keep a close eye on market dynamics, conduct thorough research, and make informed investment decisions based on their risk tolerance.