Luna Crypto Crash: What Happened To Terra Luna?


Here is What Happened to LUNA and Why the Price Can Continue Crashing

Terra's LUNA crypto has plummeted to a new low in the previous two days, dropping severely in terms of cost and losing its peg to its stablecoin, UST.

At the time of publication, the price of LUNA had dropped by 85.9% to $5.59. UST is now trading at $0.543305, down 39%.

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UST was marketed as an algorithmic stablecoin, unlike previous stablecoins, but what caused its price to plummet?

What became of Terra Luna?

The Luna cryptocurrency collapse began during a time of falling cryptocurrency values, with most other currencies and tokens following suit.

This influence on Luna was a huge concern for TerraUST, as it threatened to depeg the stablecoin.

UST is an algorithmic stablecoin that is controlled by computer instructions that keep its price stable. To keep the price of these tokens stable, the method entails burning or minting LUNA/UST.

Unlike conventional stablecoins that are linked to liquid commodities such as gold, however, Luna's crypto meltdown was unavoidable due to the algorithmic stablecoin system's incapacity to tolerate significant market volatility as compared to traditional pegged stablecoins.

According to Wu Blockchain, the LUNA foundation guard was forced to release roughly 46 million tokens to prevent the depegging of its stablecoin UST due to the extraordinary Luna crypto meltdown.

In addition to these challenges, Binance has suspended LUNA and UST withdrawals due to network congestion. Binance has now been chastised for this decision. Some on Twitter compared it to Robinhood's early 2021 restriction on GME trading.

The Luna Foundation Guard had been buying Bitcoin in order to save UST from being depegged. During the slow crypto crash, however, the strategy did not succeed.

Do Kwon of Luna stated he is working on a way to recover the coins, but nothing has been revealed yet?

 Expert’s Take 

"The recent occurrence of UST losing its dollar peg has sent shockwaves across the crypto market as it has revealed the vulnerability of algorithm-backed stable currencies," Jennifer Lu, co-founder of Coin store, told Business Today. UST went as low as $0.60 yesterday as a result of the greater liquidations caused by macro-market instability, triggering a significant sell-off in LUNA and one of the worst price crashes in the company's history. The Luna Guard Foundation (LGF) rushed to assist UST by selling significant Bitcoin holdings in order to maintain the currency's value. LUNA is now trading at $11, down from an all-time high of $119.18 in April 2022. This period of instability in LUNA is predicted to continue since the general crypto market is projected to improve.

Investors should exercise caution when investing in algorithmic stablecoins, according to Anshul Dhir, COO and co-founder of EasyFi Network, who told Business Today, "There is an intrinsic risk associated with algorithmic stablecoin; anyone who invests or has invested in them should not blame the project founders or the industry." Before investing your money in such studies, you should be aware of the hazards involved. When it comes to such trials, the risk is shared not just by the founders, but also by every user who participates."

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