LUNA (Terra) 99 percent minus, UST fights for survival – drama on the crypto market
What began slowly over the weekend and picked up rapid momentum from Monday has come true: the ecosystem of Terra (LUNA) has collapsed and has driven the overall crypto market into a downward spiral. Three key metrics:
– LUNA itself as a linchpin in the ecosystem is trading at levels below $0.50 as of Thursday morning. As recently as March 2022, LUNA had celebrated all-time highs of over 100 US dollars. With more than 99 percent loss in value, LUNA has now crashed to the level of a shitcoin, tens of billions of capital were destroyed almost overnight and investors have suffered an almost total loss here.
– The stablecoin UST (TerraUSD), which is actually algorithmically secured by LUNA, was unable to restore the 1:1 connection to the US dollar despite rescue attempts. A theoretical value of around 0.6 US dollars is still given for UST, but there are no buyers on the large crypto exchanges.
– DeFi under LUNA with UST was a growing market as of Sunday and had attracted capital by $30 billion. According to DeFiLlama figures, a good 3 billion US dollars remained after the collapse. This should mean the end for dozens of projects.
Terra Founder Do Kwon in the crossfire – the past is catching up to him
Just yesterday, Wednesday, the founder of Terra, Do Kwon, talked about rescue and reconstruction plans for LUNA and UST. His last suggestion on Twitter was to attract fresh capital into the Terra ecosystem by issuing new Special Drawing Rights. But there is neither enthusiasm nor chances of success for this model.
A message from the US trade magazine CoinDesk burst into the already tragic situation. This exclusively revealed that Do Kwon, among other names, was one of those responsible for the quickly failed stablecoin Basis Cash (BAC) in 2020. Like UST, BAC should also achieve its stability through algorithms and not through cash reserves. Do Kwon has not yet commented on the news and is now suspected of starting a series of bankruptcy projects.
In the US, experts expect that the SEC and other authorities will take a closer look at the Terra and Do Kwon case. Were investors lured with false promises? Is there evidence of a pyramid scheme? Was it possible to save capital with insider trades or even speculate against LUNA and UST? Hardly any accusation seems too far-fetched at the moment.
Black week for Bitcoin and Co. – is the long rainy season beginning now?
In the wake of the panic emanating from LUNA and UST, Bitcoin (BTC) and all major altcoins across the board have taken a beating. Bitcoin has fallen back to around 27,000 US dollars and thus to its lowest level since December 2020. Ethereum (ETH), as the number two cryptocurrency, does not look much better: At currently around 1,800 US dollars per ETH, the psychologically important one became Dropped below $2,000 and Ethereum is down almost 40 percent over the week.
No matter which altcoin you pick today: 30 percent minus over the last few days is almost a positive sign, shooting stars from 2021 like Solana (SOL) and Cardano (ADA) have even collapsed by 50 percent. IOTA went down by 54 percent.
A deeper analysis of the shock waves and domino effect is still pending. What is certain is that the concept of algorithmic stablecoins such as UST will not return any time soon. The entire DeFi sector was discredited by the crash of LUNA and UST, which advertised 19 percent annual interest for investments in TerraUSD. The future will have to show whether and when a distinction will again be made on the overall crypto market between obviously questionable projects and proven cryptocurrencies.
Conclusion: UST and LUNA are at the end – collateral damage is huge
Anyone who still believes in a rescue of LUNA and UST must be mocked as a “naive dreamer”. Those who have always said “too good to be true” about UST can feel vindicated. For the crypto industry as a whole, it is now a matter of putting out the conflagration.
