TerraUSD stayed far below $1 as LUNA fell 94% on May 11

A stablecoin failure became a market event

TerraUSD (UST), the Terra network token designed to trade at $1, remained far below that target on May 11, 2022, while its linked asset LUNA suffered another collapse. Kraken’s report for the UTC reporting day recorded UST at $0.8116 and LUNA at $1.06. It calculated a 94% daily decline for LUNA from public market data distributed through Kraken’s WebSockets API. On that venue, LUNA generated $203.6 million of spot volume and UST generated $212.2 million.

A separate CoinMarketCap historical snapshot placed UST at $0.8011, with a displayed market capitalization of $10.72 billion, 13.38 billion UST in circulating supply and $7.68 billion of trailing 24-hour volume. The two price observations are close but not interchangeable: Kraken’s figure is venue-specific and attached to its UTC daily report, while CoinMarketCap aggregates markets and presents a snapshot with a rolling volume window. Neither is an official closing auction; crypto trades continuously.

The central fact was therefore not a single intraday low. It was that an asset marketed around dollar parity was still roughly 19 to 20 cents below $1 at the cited observations, while the token intended to help absorb redemption pressure was losing most of its value in one UTC day.

Why the mechanism was under stress

UST was not presented as a conventional bank-reserve stablecoin. Terra’s design offered a protocol conversion relationship between UST and $1 worth of LUNA. In principle, arbitrageurs could destroy UST for LUNA when UST traded below $1, reducing UST supply and encouraging a return toward parity.

On May 11, that mechanism confronted a reflexive problem. Redemptions could create more LUNA just as sellers were marking LUNA sharply lower. A lower LUNA price meant more units had to be issued for the same nominal redemption value, adding dilution and potential selling pressure. This description explains the design risk; it does not establish who initiated the selling or prove a coordinated attack. The surviving contemporaneous records do not justify that attribution.

Terra co-founder Do Kwon publicly acknowledged on May 11 that UST supply seeking an exit had to be absorbed before a repeg could begin. He supported proposal 1164, which sought to enlarge the protocol’s base pool and shorten its recovery period so more UST could be processed. CoinGecko’s event chronology summarized the proposed change as raising the BasePool from 50 million to 100 million SDR and reducing PoolRecoveryBlock from 36 to 18 blocks. Those were proposed emergency parameters, not proof that parity had been restored.

The shock spread beyond Terra

The same Kraken UTC report recorded bitcoin at $28,994, down 6.5%, and ether at $2,075.20, down 11%. Kraken reported $3.6 billion in daily spot volume across its markets, against a 30-day average of $892.1 million. That comparison indicates unusually intense trading on one exchange; it should not be treated as total global cryptocurrency volume or as proof that Terra alone caused every move.

CoinMarketCap’s May 11 snapshot likewise showed bitcoin at $28,936.36, down 6.73% over its trailing 24-hour window, and ether at $2,072.11, down 11.58%. The concurrence across datasets supports the interpretation that Terra’s crisis unfolded inside a broad risk-off session. Causation remains harder to isolate because macroeconomic news, leverage, liquidity and cross-venue liquidations can move simultaneously.

What was knowable on May 11

By the end of May 11, 2022 UTC, the evidence supported three restrained conclusions: UST had not regained durable dollar parity; LUNA’s market value and trading price had deteriorated dramatically; and the proposed response depended on accelerating the same mint-and-burn pathway already under pressure. It did not yet establish the final fate of the Terra chain, any later replacement network, subsequent legal findings or the losses of institutions whose condition became public afterward. Those belong to later records and should not be projected backward into this date.