Terra (LUNA) is in a headlong fall, having lost about 98% in less than 24 hours, causing panic and anxiety in the market as well as among investors. According to CoinMarketCap data, LUNA fell below $1 and touched $0.08384 from a 24-hour high of $32.71.
The market capitalization of LUNA has likewise plummeted by 74%. The third-largest stablecoin, TerraUSD(UST), has dropped to 14th place. Yesterday, UST fell to $0.68 before gradually rising to $0.94 by the end of the day. However, on the second day, it plummeted to $0.2998, demonstrating the volatility of the stable coin.
Market swings are expected, and modest corrections are expected. Stable coins’ entire purpose is to survive market volatility. However, the UST broke its $1 anchor and fell sharply.
UST is an algorithmic stablecoin designed to trade 1:1 with the US dollar. According to Chinese crypto blogger Colin Wu, 46,239,360 LUNA were issued on May 10th. Over 80 million additional LUNA tokens have been created in the last four days.
In an attempt to keep the price at $1, 1.2 billion UST were destroyed on May 10. This burn set a new record for the amount of cryptocurrency burned in one day.
The cause of Terra’s carnage
It all began on May 9, when a succession of ostensibly suspicious events surrounded the UST. Curve provided Terraform Labs with $150 million in UST liquidity. The Terra ecosystem’s stablecoins were dumped four minutes later, causing a sell-off, and a newly funded address bridged $84 million in UST to Ethereum exactly one minute after.
DO Kwon, the business’s CEO, defended the corporation, alleging that they had seized Curve’s liquidity to place it into yet another pool the next week. He explained that the sell-off was done to alleviate the imbalances and that Terraform Labs had no motive to veer the stablecoin.
Kwon finally broke his silence through a Twitter thread. Considering the fact that the previous 72 hours had been “extremely challenging,” Kwon was ready to reveal his rescue efforts. Kwon explained why LUNA’s price dropped so drastically, saying,
In a community proposal pitch, Kwon stated that the only way to move forward was to raise the amount of LUNA minted per day. The precipitous drop alarmed exchanges, with some, like as Binance, suspending LUNA withdrawals.
However, despite the carnage of Terra sending tremors throughout the crypto world, its impact on Bitcoin has been minimal, according to numerous crypto experts.