The LUNA Cryptocurrency Crisis: What Do We Know So Far

The value of the cryptocurrency known as Luna, which was previously among the most expensive cryptocurrencies, has recently experienced a precipitous drop. Its price dropped dramatically on May 11, and it is currently being traded for around about $0.05 per token.

LUNA has Left its Orbit

It is highly likely that the devaluation of the Terra LUNA cryptocurrency, which is a component of the Terra infrastructure protocol and was once among the top ten in terms of market value, will go down in history as the most significant event of the past week and possibly of the past several years as well.

More recently, the coin was actively coming into projects that were actively launched on Terra, and the network was confidently outperforming competitors. In addition, investors were actively participating in the market. Nevertheless, at the moment the protocol is more in its dead state than in its living state, and the network is fighting to keep its lead.

If the price of the token was $65 on May 9, and its current price is around 0.00005, then its value has considerably reduced from that time, suggesting that its price has been approximately 0.00005. It was decided to put a stop to the operations of the network, and the possibility to buy or sell the coin was removed from all trading platforms.

What exactly is going on right now?

The market capitalization of Luna was among the top 10 in all of the world at the beginning of the month of May. Over the course of the previous week, it was estimated that the price of its token was somewhere in the neighborhood of $80, and the entire valuation of the corporation hit $28.5 billion. The value of the currency decreased as a direct result of the actions taken by one of the most major investors. More precisely, this investor put up for sale a total of $300 million worth of stablecoins denominated in Terra USD.

The United States Treasury Stable Coin (UST) is one of a kind among stablecoins in that it does not have any real assets to back it up. This is the reason why the UST severed its relationship to the dollar. The technique that ensures its consistency is wholly computational in character. It does this by employing the Luna fiat currency, which was also utilized in the manufacturing of new UST tokens and in the maintenance of the $1 stablecoin.

Its consistency was ensured by the use of an algorithm; more specifically, the system would produce additional Luna coins whenever the price of the token decreased to an amount less than $1. They received their compensation in Terra USD on an automated basis, which continued until the value of the stablecoin returned to $1.

The excessive volatility, however, has “overloaded” the stablecoin, which has led to the coin decoupling from its previous peg to the dollar. This is the effect of the extreme volatility. After reaching a high of $1, the value of the cryptocurrency known as Luna has significantly decreased and is now only worth $0. The precise value is reported to be 0.0000277 dollars by CoinMarketCap, which was consulted for the data.

The actions of the investor were the cause of the reduction in the rate of the UST. The situation was attempted to be fixed by the administration of the project by auctioning off all of its prized assets in the hopes that UST would be able to regain some of the money it had lost. Now, the management of Terra is attempting to seduce new investors by declaring that in order to maintain the value of UST, they require an investment of one billion dollars. This is part of their effort to attract new investors.

Will Luna Come to Life Again?

Do Kwon, the founder of Terraform Labs, revealed in a tweet that the company’s flagship product, Terra, would “get back in shape.” He has launched a campaign with a budget of one billion dollars, which he feels could be the solution to their problem.

Major cryptocurrency exchanges, on the other hand, have already stopped working with LUNA.

In order to safeguard traders, Bybit is going to withdraw the spot BTC pair, and eToro has stopped trading on Luna until further notice. Binance will eliminate its Luna futures pair.

It is extremely improbable that the price of Luna would return to its previous level of $80, especially if other cryptocurrency exchanges start abandoning it at the same time. On the other hand, the cost of a single token is now less than one penny. This is a positive development. This is a very high-risk investment that could potentially bring in a huge profit.