In the past couple of days, the crypto space witnessed a nightmare of a token being in the top 10, which is now being delisted from the majority of the crypto exchanges. Yes, you read it right, Terra blockchain’s native token LUNA Price & stablecoin UST Price, both suffered dreadful days as many platforms have stripped them from their list. CoinDCX also joined the army to protect the trader’s interest.
However, the Terra community still stands strong and waits for better days as the team has now come up with a recovery plan. A designer from the team recently shared a recent development of making the UST fully collateralized and also developing new mechanisms for LUNA.
The community is deciding on a new @terra_money, between restoring a snapshot prior to attack, removing TFL, fully collateralizing UST and drafting & deliberating new mechanisms for $LUNA.
We must salvage the remaining value in the ecosystem & community and rebuild the right way
— Will Chen 陈俊宏 🌖 (@stablechen) May 13, 2022
It has been said that a popular Swiss Asset Manager GAM is holding negotiations with Terraform Labs to support the UST.
Terra’s UST-LUNA Price Crash Explained
Terra LUNA price was performing pretty well during the times when most of the crypto assets were consolidating very hard. The LUNA price smashed their highest level around INR 8,800 when BTC prices were declining from INR 36 lakh to INR 30 Lakh.
So what went wrong?
Before digging deep into the problem, it is important to know the ‘Peg-Mechanism’ of Terra. Terraform labs constitute 2 main assets, TerraUSD (UST)-the stablecoin and Terra (LUNA)-the native coin. UST is an algorithmic stablecoin and its stability is deeply co-related to the LUNA price. If UST loses its peg at $1, then UST is burnt and new LUNA coins are minted. And if UST rises high then LUNA coins are burnt while new UST coins are minted.
Therefore, both prices maintain each other’s value. Things got messed up when $285 million worth of UST was liquidated on Curve and Binance
today's attack on Terra-Luna-UST was deliberate and coordinated. Massive 285m UST dump on Curve and Binance by a single player followed by massive shorts on Luna and hundreds of twitter posts. Pure staging. The project is bothering someone. 🌝 on the right path!
— Caetano Manfrini 🔺 (@caemanfrini) May 8, 2022
The UST got de-pegged heavily and Terraform Labs liquidated all their 40K BTC holdings to stabilize the UST peg. This led to a massive crypto crash as Bitcoin fell below $27,000 for the first time since December 2020. As the crypto space had a bearish start to May’s trade and was consolidating within narrow ranges, a huge influx of BTC destabilized the entire market largely.
Further, LUNA price and UST both started plunging hard, being unstoppable! And as UST lost its peg, new LUNA coins were minted, which impacted its price heavily. Also, a popular lending protocol Anchor also witnessed huge ANC withdrawals as it offered a 20% yield on UST deposits.
Additional Read: Crypto Crash Reason
Terra LUNA Price Movement This Week
Source: Tradingview
- Terra price maintained a significant upswing since the beginning of 2022 trade and reached a peak beyond INR 9000.
- However, while the price was recovering from the April price drain, the UST de-pegged incident took place which literally washed out the asset
- The price dropped hard by nearly 100% every day until it lost 100% of its value and currently added up a couple of zeros in its value
- Terra(LUNA) Price is very close to Shiba INU(SHIB) price around INR 0.00262 at the moment and hence may remain declined until the LUNA tokens are not burnt
Additional Read: Terra LUNA 2.0 Revival Plan
TerraUSD (UST) Price Movement This Week
Source: Tradingview
- TerraUST being a stablecoin had maintained its $1 peg at INR 76 strongly for a pretty long time since the beginning
- However, the recent liquidation destabilized the asset heavily as the UST lost its peg to slip to INR 58.9 for the first time
- No doubt the asset managed to recover and had smashed INR 72.47 the very next day, but the space was filled with FUD against the asset that fueled the liquidation
- At the press time, the UST has slipped below INR 10 to trade around INR 6.66 and may hover in narrow ranges as many exchanges have suspended trading for UST pairs.
Additional Read: CoinDCX Delists LUNA, UST, and ANC Tokens
Terra’s Circulation Supply Inflation
Source: Messari
Much similar to simple demand and supply dynamics, when huge LUNA tokens flooded into the space, the demand eased out. Therefore, the price was negatively impacted heavily which currently appears very hard to recover. Only if the newly minted LUNA coins are burnt when UST regains its $1 peg, the price may receive a bullish boost.
Bitcoin Transfers Spike Post Terra Crash
Source: data.bitcoin
The Bitcoin price was consolidating along $36K during the beginning of the present trading month. However, as the price ignited a descending trend, the volume also intensified. Further, as the price dropped to 10-month low levels, the volume peaked as high as 268 million which was the day when Luna Foundation Guard emptied their BTC reserves.
Can Terra LUNA Price Ever Recover and Come Back on Track?
Terra’s incident was a never-seen occurrence in the entire crypto space, where the stability of the algorithmic stablecoin was deeply questioned and criticized. At present, the Terra blockchain has halted the working which may or may not be resumed in the future. Therefore, very few chances of recovery or rebound may be expected as of now.
The Terra blockchain has officially halted at block 7607789.
Terra Validators have halted the network to come up with a plan to reconstitute it.
More updates to come.
— Terra 🌍 Powered by LUNA 🌕 (@terra_money) May 13, 2022
However, as mentioned earlier, either the LUNA-UST peg mechanism has to be altered or the excess LUNA tokens in circulation must be destroyed. And only when the supply scarcity spreads, one can expect a minor recovery but trading at the same pace as before may be just a dream.
Additional Read: Will SOL Price Hit INR5000 this week?
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. In case you have any queries, write to [email protected].
The above information represent the independent views of Primestack Pte. Ltd, Neblio Technologies Pvt. Ltd, and/or their affiliate entities and are for informational & educational purposes only. The content, information or data provided above is not an offer, or solicitation of an offer, to invest in, or to buy or sell any interest or shares, virtual digital assets/ crypto products or securities, or to participate in any investment or trading strategy. Any statement or communication made above shall not be treated as a legal, financial, investment or tax advice by the reader. The calculations, data, risk-return formulations, performance or market capitalization indicators captured above are based on the independent data sourcing including collation of public information and/or analysis performed by analysts, advisors or employees of Primestack Pte. Ltd/ Neblio Technologies Pvt. Ltd and/or their affiliate companies and/or any third party. Past performance is not indicative of any future results. The reader(s) are hereby advised to consult their financial/ legal/ tax advisor(s) before making any investment.
