Everyone started to ask questions like why is cryptocurrency Terra Luna dumping or will Luna recover from this situation. Because on Wednesday, the UST (Terra USD), an algorithmic stablecoin, de-pegging incident drove down Terra Luna’s price by more than 80%.
Will cryptocurrency Terra Luna survive?
The Terra ecosystem’s success is premised on the use of UST as a stablecoin, therefore LUNA and UST are inextricably linked. LUNA invests in UST and loses money as the demand for UST rises. In the long term, as with other cryptocurrencies, the LUNA supply may become de-inflated as a result of upgrades.
If the market perceives UST to be volatile, LUNA’s value may fall. Following the Wormhole hack, UST lost its peg, causing the price of LUNA to plummet for a period of time.
The UST rate is going down
The UST Curve steadily decreased as people swapped UST for rival stablecoins when the value of UST began to plummet dramatically below its fiat peg. As a result of short selling, the price of LUNA fell, and Terra was compelled to issue additional LUNA to relieve the downward price pressure.
The UST rate is decreasing. The value of the LUNA dropped as a result, although the peg was not reinstated. UST’s trust was not restored by the Terran Treasury’s $1.5 billion Bitcoin auction, which resembled bank robbers who would rather receive pennies than exchange them for LUNAs.
If you wonder why is Bitcoin crashing and what is the Terra Luna crash’s effect on Tether, Bitcoin, and other cryptocurrencies, we explained everything in detail.
What happened to Luna Terra?
Co-founder of Coinstore, Jennifer Lu, about the whole mess. She explained what happened in detail: “The recent incident of UST losing its dollar peg has sent shockwaves across the crypto market as it has exposed the weakness of algorithm backed stable coins.”
“During the larger liquidations due to the macro-market volatility, UST fell down to as low as $0.60 yesterday which sparked a major sell-off in LUNA and resulted in one of the biggest price crashes in LUNA’s history. Luna Guard Foundation (LGF) scrambled to support UST by liquidating large Bitcoin wallets for sustaining UST’s value. As we speak, LUNA is down to $11 from its all-time high of $119.18 in April 2022, this phase of instability in LUNA will remain because the overall crypto market is expected to remain choppy in the coming weeks.”