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Terra LUNA Crypto Crash Explained with Graphs | Will LUNA Price Recover Again?

LUNA Price Crash

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. 

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

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

Additional Read: Terra LUNA 2.0 Revival Plan

TerraUSD (UST) Price Movement This Week

Source: Tradingview

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. 

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

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