What Has Happened to Terra (LUNA)?
Another of its main usage is to be the pegged asset of TerraUSD (UST) algorithmic stablecoin which maintains its peg to USD via arbitrage system.
What is Terra (LUNA) coin?
LUNA coin, created by Terraform Labs, is a governance token which grants its holders voting power over the protocol. Another of its main usage is to be the pegged asset of TerraUSD (UST) algorithmic stablecoin which maintains its peg to USD via arbitrage system. Terra maintains this equilibrium by minting and burning of TerraUSD(UST) and its counterpart token “LUNA” to keep the supply in check. Arbitrageurs make a small profit through the price difference and, in turn, help keeping the equilibrium.
What has happened to LUNA crypto?
Following what mentioned above, Terra rewarded its liquidity provider 20 percent interest when staking TerraUSD(UST) in its platform. The situation took a bad turn when there was a rumour in May 2022 that Terra is going to change the fixed interest of 20 percent to a float rate. The liquidity providers who were previously enjoying their recent 20 percent interest now faced with concerns. The panicked liquidity providers then sold TerraUSD(UST) for other stablecoins or converted them to LUNA instantly causing major imbalance in the system. The price of LUNA sharply plummeted and directly affected the price of TerraUSD(UST) explaining the LUNA crash.
With the current situation, Luna coin delisting is happening everywhere among centralized/decentralized exchanges making it even more difficult for people to trade the coin.
What is the current price of LUNA?
As of 17th of May 2022 (date of writing), LUNA coin price values at 0.00018 USD. It has sharply plummeted from 98 USD in 20th April 2022 to the current price in a manner of a few weeks.
Is LUNA going to recover?
In our opinion, it would be miraculously difficult for Terra(LUNA) to regain its old status. There might be an increase in price because of traders’speculations here and there but never to the same level. However, no one knows the future, Terra(LUNA) might make a spectacular comeback and we’ll be happy for it.
Why has LUNA crashed so much?
The project depends too heavily on the arbitrage system. Once the benefit isn’t inviting for arbitrageurs anymore, the project is bound to crumble. If TerraUSD(UST) and LUNA are pegged by other types of assets, perhaps the downfall might not be too severe. In anycase, this shows us the power of rumour. Even the mightiest of the projects could fall by just a mere rumour and that’s one of the elements of the cryptoworld.
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