Terra Luna, the native cryptocurrency of Terraform Labs, has declined by 97 percent in the previous 72 hours. According to statistics from CoinMarketCap, the coin is currently trading at $0.5145 at the time of writing. It is a slaughter of Terra investors, who were wiped out in less than 48 hours as the price of its native token, LUNA, reached its lowest point in a year.
At one point in the month of May, the token’s value fell by 55%; it subsequently fell by a further 85%. The second week has wiped around 95% of investor value.
What Does This All Mean?
Its sibling company and the foundation’s stablecoin TerraUSD (UST) has again “depegged” from $1 to below $0.45, a decline of around 55%. This is the primary factor harming Terra’s reputation (LUNA). Terra’s market capitalization fell below $2.75 billion, making it the 34th biggest cryptocurrency market cap. It was the eighth-largest crypto coin during its heyday, with a market capitalization of over $25 billion.
Jennifer Lu, a co-founder of Coinstore, said that the recent occurrence of UST losing its dollar peg has sent a wave of shock across the crypto market by revealing the vulnerability of algorithm-backed stable currencies.
Terra is a Blockchain technology that employs stablecoins backed by fiat currency to support price-stable global payment networks. It combines the price stability and widespread usage of fiat currencies with Bitcoin and provides inexpensive and quick payouts. The TerraUSD (UST) stablecoin has lost its dollar peg for the third consecutive day. As UST was ‘depegged,’ the value of LUNA, its sibling token, took a significant fall.
Can They Recover?
The Terra network wants to purchase $10 billion in Bitcoin as a UST reserve to maintain the stablecoin’s value. This is the only rationale for backing UST with Bitcoin. In order to preserve its peg, the Luna Foundation sent 42,500 Bitcoins to the OKX crypto market.
Despite the fact that the creator of the Luna Foundation, Do Kwon, has been promising people and has lately tweeted that they would restore the peg, the peg has been lost. Luna and all of its DApps, including Anchor Protocol, have suffered a significant loss.
LUNA’s revival will rely on the remedial actions made by the parent network/LGF, which has amassed a substantial Bitcoin reserve via a series of large-scale Bitcoin buys.
According to some market actors, such ventures are experimental, potentially volatile, and unsafe enough to burn the hands of all the consumers involved. They cautioned investors about the instability of such stablecoin ventures’ algorithms.
There is an inherent risk involved with algorithmic stable currencies, and investors should not blame the project’s creators or the industry as a whole for the inherent risk of these types of projects, which need to be considered beforehand.Other primary crypto-tokens offered on Altalix, such as Bitcoin and Ethereum, decreased 4 percent, which is not nearly as extreme as Terra’s decline of 95 percent. In contrast to other cryptocurrencies like BNB, Solana, Cardano, XRP, and Dogecoin, Shiba Inu fell 10%.