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The Aftermath of Terra (LUNA) Crash: Why UST May Regain Its Peg Value?

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The Aftermath of Terra (LUNA) Crash: Why UST May Regain Its Peg Value?

  • Terra (Luna) fell at 99.6% after reaching its all-time high of about $120 last month.
  • The terra  price has now dropped to 0.005.
  • Crypto exchanges have started taking steps in response to the fall of Luna.

The trillion-dollar crypto market is struggling! Post the dramatic fall of Terra (Luna), a popular cryptocurrency, from more than $400 billion to about $500 million, on Thursday morning, making investors lose their life savings in just a fraction of seconds. 

The crash of Terra (Luna), which was once ranked among the top 10 most valuable cryptocurrencies, has caused turbulence in the crypto industry, with several investors now living in fear of losing their lifetime savings in the aftermath of the tragic mayhem.

Terra (Luna) had reached its all-time high of about $120 last month. The current scenario is the first of its kind where the top crypto collapsed below $1. 

No one imagined Luna will ever hover around 10 cents..

The past 24 hours has created avalanche in the crypto market as the LUNA price fell 96%, pushing it to less than 10 cents. That’s down from about $60 earlier this week and a record $120 in mid-April. 

Terra USD de-pegging messacre

The massacre in the market caused LUNA prices to snap at a lightning speed. Though it didnt stopped here LUNA plummeted through various support levels as terraUSD (UST), a Terra-issued stablecoin that’s meant to be priced 1:1 to the U.S. dollar, lost its peg.

Fear of Intense selling-pressure 

The sell pressure on Luna got intense over the weekend as millions of investors started liquidating their earnings on Anchor, basically a Terra protocol for earning yields on UST, to lower down the interest rates as per the analytics.

It all happened around the TerraUSD algorithmic stable coin de-pegging massacre. So now, 1 UST can be redeemed or minted for exactly $1 worth of LUNA at any time. 

Theoretically it may help UST retain its value and can create demand for both tokens. Trading of Luna and UST is still on to maintain the peg and profit by buying and selling, incentivizing them to maintain UST’s peg.

What caused the selling pressure? Will it survive the heat? 

The massive flow of supply has added selling pressure on LUNA tokens, as per the price drop trend. Even though the market is bleeding it still put UST on the path of recovery, to the 60 cents level in Europe in the morning hours on Thursday.

Interestingly, Terra also proposed several measures to save UST’s peg and to prevent futher liquidation of Luna on Thursday. 

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The entire week has baggage has demeningly pushed LUNA out of top ranking crypto coins and as of thursday it was ranked as 81st in the market. The tokens were valued at just under $4 billion last week, while on Thursday the capitalization snapped down to $720 million.

Conclusion

Inspite of the fall, many industry experts are on ground as it may upbeat on the longer-term outlook of algorithmic stablecoins.

According to Brian Gallagher, co-founder of Partisia Blockchain, “It is still the earliest days of algorithmic stable coins. There will be many failures along the way to hold the peg, as they’re mostly in the experimental phase. We have to accept the failures along the path.”

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Will Burning Excess LUNA tokens Really Impact the Price After it Failed Miserably with SHIB & ETH Price?

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Will Burning Excess LUNA tokens Really Impact the Price After it Failed Miserably with SHIB & ETH Price?

The Shiba INU platform to stabilize the SHIB price had earlier introduced a burn mechanism after Ethereum’s ETH 2.0 with EIP 1559 upgrade went operational. However, the burn mechanism does not appear to have fueled the price rally as both SHIB price and ETH price are drowning in the same bearish well, despite the fact that the tokens continue to burn as per the algorithm. 

Recently, Shiba INU recorded a milestone of burning nearly 12.6 billion SHIB tokens in a day worth nearly $123,551. Despite the burn rate spiked by more than 5000% yet, the price remained largely un-impacted. A similar instance has been recorded with the ETH price. According to the burn portal, more than 2,340,000 ETH has been burnt since its inception. Moreover, the burnt tokens were far ahead of the tokens issued on the same day. 

Therefore, when the burn mechanism has not led to any major impact on the second-largest token, Ethereum and the most popular memecoin Shiba INU, How fine will it be for the LUNA price?

As the entire community currently is after burning the excess minted tokens when UST got heavily de-pegged. LUNA tokens in circulation are closely related to the UST’s peg. As the stablecoin lost its peg, new LUNA tokens were minted and flooded into the market. The circulating supply sky-rocketed from just 1.46 billion to as high as 6.53 trillion at the press time. This impacted the price heavily which is around $0.000134 and hence the community is constantly asking to burn the tokens instead of a fork or LUNA V2. 

Considering the previous history of very popular tokens, which were merely impacted by the burn mechanism, burning LUNA tokens may also not be the one-stop solution to stabilize the LUNA price. And hence the team behind the tokens may have to have a strong plan to stabilize both LUNA and UST prices at the same time. 

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Sahana Vibhute

A passionate cryptocurrency and blockchain author qualified to cover every event in the crypto space. Researching minute occurrences and bringing new insights lie within the prime focus of my task.

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Pantera Capital Sold 80% LUNA Tokens Before Massive Crash!

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Pantera Capital Sold 80% LUNA Tokens Before Massive Crash!

Pantera Capital, one of Terraform Labs’ most prominent supporters, sold out over 80% of its Terra (LUNA) investment before the currency’s fall last week.

In a recent interview with The block, Joey Krug, co-chief investment officer at Pantera Capital, told :

“The market has been fairly frothy over the last year and thus we’d exited the majority of our position before any of this happened,” “Roughly 80% over the last year, fairly gradually over time.”

Pantera Capital-backed Terraform Labs at least twice, first with a $25 million round in January 2021 and again with a $150 million ecosystem fund round in July 2021. Following the publication of the report, Krug noted that Pantera’s LUNA investments were distinct from its Terraform Labs investments and occurred in the summer of 2020, following LUNA’s initial public offering.

He said :

“We managed that position down over time as it became increasingly profitable/large, in order to maintain a diversified portfolio,”. “We initially invested in LUNA because of the progress we saw in developer adoption, the payments usage, and the broader ecosystem being built on Terra.”

Pantera made a huge profit since it liquidated the majority of its investment early. Pantera Capital partner Paul Veradittakit told The Block that the business transformed $1.7 million into about $170 million.

Meanwhile, other Terraform-backed venture capital businesses are suffering losses as Terra’s native LUNA token has lost nearly all of its value owing to the UST crisis.

Pantera liquidated much of its LUNA assets from the remaining 20% stake after it learned of UST’s de-pegging the week before.

“We got out of 2/3 of that at an average price of $25.6,” said Krug. “The remainder of that was staked via LUNAX and so unable to be sold.” Stader Labs’ LunaX is a liquid staking token.

Is Anchor Protocol a Best Investment?

Veradittakit has encouraged people to invest in Anchor, a Terra-based decentralized banking network that, like UST, has lost virtually all of its client assets.

According to statistics from Defi Llama, Anchor’s total value locked (TVL) has dropped from over $16 billion before the UST meltdown to just over $150 million currently. The anchor was described by Veradittakit as a “savings account” with a high “fixed” interest rate.

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“20% APY [annual percentage yield]. A fixed-income, low-risk financial instrument with returns as high as Anchor is truly incredible,” Veradittakit had said in a Medium blog post in April 2021.

Anchor gave UST depositors a 20% annual percentage yield. Anchor contributors recently advocated decreasing the APY to an average of 4% in order to make its yield reserves more viable due to the UST problem.

On Wednesday, around 7:30 a.m. ET, the fork suggestion went public. Over 84 million LUNA have voted in support, with over 9 million voting against at the time of writing. To pass, the vote requires 188 million LUNA in favor.  Pantera’s LUNA investments have been updated for transparency.

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Implosion Of Tether Is Closer Than Ever! Fears Over USDT Downfall Loom – Here’s Why

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Implosion Of Tether Is Closer Than Ever! Fears Over USDT Downfall Loom – Here’s Why

Tether’s USDT market valuation has decreased by nearly $9 billion after Terra’s UST meltdown. The market saw a dramatic sell-off last week as a result of the collapse of Terra’s UST stablecoin, with USDT trading as low as $0.95.

Tether’s “implosion” was approaching, according to the crypto analyst known for his opposing viewpoints. This is perhaps not surprising coming from an expert who has already criticized Tether’s ethics. What was more concerning was a graph depicting Tether’s declining market cap.

Indeed, as of press time, USDT’s market capitalization had plummeted to levels last seen in December 2021. Even though USDT’s market value ranking did not change, this is a worrying warning for investors. Tether, meanwhile, was trading at $0.999 at the time of publication.

As if that weren’t enough, Tether supply on exchanges has increased by more than two billion in recent days, with a particularly sharp increase of stablecoins returning to the markets since early May.

Which is the New Go-To Stablecoin?

While much of this happened around the time Tether was briefly de-pegged, the trend has continued, and Tether supply on exchanges has reached new highs.

Another interpretation is that investors are taking their USDT to the exchanges to buy the dip and leave with shiny new alts. Glassnode noted that,

“If we look to the supply of USDT, we can see that indeed, over $7.485 Billion worth of USDT has been redeemed with week. The total USDT supply declined from near the $81.237B ATH to $75.75B.”

Meanwhile, according to Glassnode’s study, crypto investors may be reconsidering their preferred stablecoin.

“Given the dominant growth of USDC over the last 2yrs, this may be an indicator of changing market preference away from USDT and towards USDC as the preferred stablecoin.”

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