- LUNA has endured an extended downturn as investors rush for the sell-off
- The token has lost more than 90% on the day and has dipped below $2.00
Crypto markets are experiencing the worst volatility caused by their correlation with stock markets, which in turn reflects the US Federal Reserve’s aggressive monetary policies against the inflation react. However, some feel the need more than others, and the Terra ecosystem is one such network, as in this bear market can hardly survive.
Terra’s LUNA token has seen a large-scale selloff as holders rush to cut their losses and sell the asset. This comes after the LUNA/USD pair plummeted to single digits, a month after it hit as high as $120 in early April.
CoinMarketCap data shows that LUNA is trading below $2.00, meaning it has lost up to 95% of its value in the past seven days. This catastrophic fall remains the talk of the town with experts vouching for proper regulation.
This collapse of one of the most promising crypto tokens is a learning point that the crypto asset class is not quite there, despite its rapidly growing popularity.
VAT stablecoin wasn’t that stable
Terra’s dollar-pegged algorithmic stablecoin UST was the source of the dangers that have beset LUNA, as the latter has helped keep the stablecoin’s price in line with the dollar.
The rush to rescue UST came with a $1.5 billion stake ($0.75 billion in UST and $0.75 billion in BTC) by the Luna Foundation Guard to allay market concerns about the stablecoin and restore pegging. However, the supplements haven’t done much to restore normalcy yet.
UST took a similar hit, losing up to 50% in the last 24 hours. TerraUSD was last spotted floating around $0.44.
consumer protection concerns
Amidst all the chaos, investors have raised concerns as crypto assets’ support of UST, including Bitcoin and AVAX, has not gone down well with the stablecoin’s backing. As long as UST is crashing, it is obvious that LUNA will also suffer as it deviates from its preferred price point.
Regulators are likely to feed on the LUNA and UST capitulations to push the justifiable need to protect investors. Treasury Secretary Janet Yellen used the case of Terra’s collapse in a hearing on Tuesday to argue why stablecoins need to be regulated.
Terraform Lab boss Do Kwon took to Twitter today to provide an update on the fiasco following a 15-hour disappearance after promising the community a remedial game. Kwon shared Terra’s recovery strategy, which focuses on absorbing the stablecoin supply that is moving out of the market.
“We support community proposal 1164 to increase base pool from 50M to 100M SDR *) Decrease PoolRecoveryBlock from 36 to 18 This will increase minting capacity from $293M to ~$1200M. This should allow the system to absorb the UST faster […] When we start rebuilding UST, we will adjust its mechanism to be collateralized.“
Source: Crypto News Deutsch