Crypto Analytics

LUNA crash makes ETP issuers sweat

  • The exchange Nordic Growth Market has stopped trading in Valour’s Terra ETP
  • LUNA’s weight in crypto indices has fallen with the price

Amid the TerraUSD (UST) and Terra (LUNA) price falls over the past few days, ETP issuers are trying to manage their exposure to the latter asset.

Launch of Swiss-based asset manager 21Shares the world’s first Terra ETP (exchange-traded product) on the SIX Swiss Exchange in January. CEO Hany Rashwan said in a statement at the time that the company was “very impressed”. [the Terra ecosystem’s] development and traction.

But the price of algorithmic stablecoin UST has dipped well below the target $1 peg over the past few days — the Terra blockchain’s native currency, LUNA, which tracks 21Shares’ Terra ETP, has fallen in tandem, and over the 24-hour period down nearly 97% as of 4:30 p.m. ET Thursday.

21Shares ETPs are designed to provide one-to-one exposure to the performance of their underlying assets. If LUNA’s price falls to zero, the fund will fall too, a spokesman for 21Shares told Blockworks.

“As LUNA experiences low prices and high volatility, it is likely that exchange spreads will continue to widen, which may ultimately lead to delisting by exchanges,” the representative said.

21Shares also offers indices such as its Crypto Basket 10 ETP, which attempts to track the investment results of an index composed of the 10 largest crypto assets by market cap. According to a fact sheet released on April 4, Terra made up 3.68% of the index. According to the 21Shares website, Terra now has a weighting of almost 0%.

“Our indexed products are specifically designed to provide diversified exposure to a wide range of cryptos, recognizing that digital assets, like traditional assets, can experience significant volatility at times and that uncertainty is inherent in every investment,” the representative said . “We promise to carefully monitor our products to ensure they deliver intended exposures and provide investors with well-diversified exposure to this emerging and sometimes volatile asset class.”

DeFi Technologies subsidiary Valor launched a Terra ETP on the Nordic Growth Market (NGM) in February.

Valor CEO Tommy Fransson said the plunge into Terra sparked “a difficult time” for the industry, noting that ETPs investing in the asset are taking a hit.

“Terra’s rapid fall in price resulted in all trading being halted by the [NGM] exchange,” he said. “We will continue to monitor the situation closely. Our primary focus is, and will always be, on the investor and ensuring they can participate as autonomously as their risk tolerance allows.”

Will Peck, head of digital assets at wealth manager WisdomTree, noted that many financial advisors are trying to achieve diversified crypto exposure for their clients. The company created the RWM WisdomTree Crypto Index in a way that minimizes the impact of volatility on any crypto asset, he added. B.LUNA.

The Index provides access to Layer 1 Networks, Layer 2 Protocols, Oracle Networks, Crypto Indexing Services, Decentralized Finance (DeFi) and the Metaverse. Terra had a 7.5% weighting in the index, according to a fact sheet released on April 22. LUNA had a weight of 0.17% on Wednesday.

“The index methodology and the index committee that oversees index construction are focused on a process that considers cryptoasset use cases and importance to the crypto ecosystem,” Peck said. “LUNA will be evaluated along with broader crypto market events and other cryptoassets in this context, which is an ongoing process.”


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The post “LUNA Crash Makes ETP Issuers Sweat” is not financial advice.

Source: Crypto News Austria

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