A lot of panic as most investors have seen just how harsh the cryptocurrency market has been of late with the market dip and luna crash.
However, for investors in algorithmic stablecoin Terra, it’s been quasi apocalyptic of late with questions like will Luna recover?
Will Luna Recover from the Dip?
The LUNA crypto price crash from Monday continues, now tracing down beneath $15 per coin. Meanwhile, the network’s dollar-pegged stable coin TerraUSD (UST) continues trading at just $0.8, far below its intended $1.00 value peg.
The stablecoin market is very important to the proper functioning of many aspects of the crypto market.
If investors lose faith in the underlying value of stablecoins, the potential for market contagion to take hold is real. Thus, many investors are watching how Terra’s LUNA and UST tokens perform in this volatile environment.
Why Is LUNA crypto crashing
After losing to 92% at 7:50 pm this Tuesday, luna might take a new direction which is still not certain if the Luna crash will continue or not.
- LUNA trades at just $15.84 at the time of writing, down 63.13% in the past 24 hours, and 80.74% over the week.
- The cryptocurrency doubly serves as a governance token for the Terra blockchain, and the reserve asset made to preserve the stability of its various stable coins.
- The most popular stable coin – TerraUSD – began drifting off of its dollar peg on Sunday, as noted by the Luna Foundation Guard (LFG). To fix the problem, the organization tried deploying some of its Bitcoin reserves on the market to prop up UST’s price.
Why UST Terra Collapsed
UST Terra, the algorithmic stablecoin of Terra, dropped from its $1 peg to its deepest point of $0.74 over the past few days. UST is currently trading 13% below $1, at $0.87. The stable coin continues to trade solidly below its peg.
- However, these reserves have failed to save the stablecoin, and its value has deviated as low as $0.69.
- To make matters worse, its crushed value has created a massive arbitrage opportunity within the Terra ecosystem. As every UST is always convertible for about one dollar of LUNA, traders are incentivized to trade their stablecoins in, only to dump their LUNA on the market shortly after for a profit.
- This has likely contributed to the death spiral of LUNA’s price, which has fallen substantially even next to other bleeding cryptos.
- Amid the chaos, Binance was forced to halt UST withdrawals from exchanges, citing “network slowness and congestion”
- Terra is now the 20th largest crypto by market cap, despite being within the top 10 just days ago.
- Terra co-founder Do Kwon stated today that he will soon unveil a plan to recover UST’s peg.
The whole crypto market is not stable now due to the crash of Bitcoin as it’s recovery process might take time.
As the market is red, take the risk and great an opportunity to out it by buying low and selling high. Even the luna will soon recover, this is not a financial advice.
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