Luna Cryptocurrency Collapse

You go out and see a person in rags, begging outside a busy market. The odds of him being a homeless, indebted person are second to the highest. The most significant possibility is of him being a crypto investor. The market is this bad at the moment. Open Binance, and you will see all reds. Bitcoin and Etherium have reached their lowest lows since 2020. But, the greatest of shocks has been Luna, associated with UST (TerraUSD), considered a stablecoin. Luna has collapsed and is on the verge of getting delisted from all global cryptocurrency exchanges. 


UST and Luna both belong to the Terra blockchain. UST is a stablecoin, which is said to retain its value in all conditions, i.e., $1. But the fall has been so significant that the value of UST has fallen to a mere 30 cents. And then there’s Luna, the accumulator coin for Terra. From $116 in April, it has failed to less than a cent. The market cap has decreased from $40 billion to $2.68 billion. 


There are a lot of speculations about the reasons for this collapse. Some people claim that there has been a malicious attack on Terra, igniting this fall. Terra is a blockchain like Ethereum and Bitcoin, which deals in UST, for those who don’t know. You can buy Luna against UST, which is, or instead, was a stablecoin retaining its value to 1 USD. Last weekend, $2 billion worth of UST was sold or taken out of the market. Such a large removal resulted in a fall, and UST fell to 91 cents. Investors saw that as an opportunity and started burning their USTs for Luna to take profits. This is where the problem arose. According to mechanisms, only $100 million of UST can convert into Luna in a day. But UST never regained its stability and kept declining. This forced investors to trade in losses to avoid any further losses. Now, the value of Luna tokens is a synonym for null.


The consequences have been, of course, the losses. About $15 billion crypto value has gone to ashes. Luna is done and dusted, and so have several investors’ wallets. But this situation has raised even greater questions regarding the stability of so-called ‘stablecoins.’ These questions, if not answered, will prove to be of great significance for the trades in the future.  

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