In early May 2022, the TerraUSD (UST) stablecoin lost its dollar peg, triggering a death spiral in its sister token LUNA that erased tens of billions of dollars in value within days. The contagion spread across the broader crypto market, and Ethereum — the largest asset with deep exposure to DeFi protocols tied to Terra — fell sharply alongside it.
Trading through this window was brutal because the panic wasn't isolated to one token: correlated selling hit almost everything at once, liquidity thinned out as market makers pulled back, and every relief bounce was met with fresh selling as more Terra-linked positions unwound. It was a textbook contagion event rather than a single asset's bad day.
Same engine, same hidden right-hand side — a different day's problem.