Cryptocurrency “LUNA” collapses by 60% as its stablecoin “UST” drops below $0.7
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Answer Cryptocurrency “LUNA” collapses by 60% as its stablecoin “UST” drops below $0.7
A long and bitter night experienced by the investors of the “Terra” project, where the prices of the cryptocurrencies of the project fell remarkably, whether it was the main currency of the project “LUNA” or the stablecoin that was also affected and lost its correlation and fell to below $0.7.
The price of the digital currency “LUNA” fell to as much as $23.50 on Binance earlier today before regaining some of its gains.
At the time of writing, the cryptocurrency “LUNA” is trading at $35.
While the major stablecoin UST fell to an all-time low of $0.68 earlier today before it too recovered slightly to around $0.90.
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We previously reported on Bitcoin Arab about how the stablecoin briefly lost its peg on Sunday.
After a short-lived recovery, things got uglier for UST as the largest stablecoin Terra completely lost its peg.
Unfinished Problems in Project Terra:
As is well known, UST is an algorithmically or algorithmically decentralized stablecoin, which means that its currency peg to the dollar is not maintained by central entities such as Tether.
Where the mechanism requires, UST deed LUNA coins must be burned (and vice versa).
The Luna Foundation Guard has been busy spreading its massive bitcoin reserves in an effort to restore UST stability, but the stablecoin is still down 6% at press time.
As it turned out, LFG’s bitcoin reserves were not enough to help the UST restore its peg to the dollar.
Cryptocurrency researcher Hasu argues that UST is in fact decentralized because its additional support, which is used by one party, is used to conduct discretionary operations in the open market, which makes matters worse.
Using its bitcoin reserves to defend its dollar peg, Terra also exacerbated the market crash.
The world’s largest cryptocurrency fell to a new annual low of $29,731 earlier today.
Read:Analyst Tom Lee: The crypto market is not speculative enough
The CEO of FTX predicted that a stablecoin backed by volatile assets would not survive a major market crash.
UST is not the first stablecoin to fail.
Last June, the Iron Finance project’s IRON algorithm crashed to zero.
Subject to follow…
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