What Happened To Terra Luna Crypto?
If you’re one of the many investors who haven’t heard of Terra LUNA, then you’ve probably been wondering: What happened to it? The stablecoin was not backed by cash reserves, and so its price began to tumble. That’s the end of the story for Terra LUNA, but investors can still learn from it. Terra’s price has fallen over 95% since April, and investors are still scrambling to find the best deal.
Terra LUNA is a stablecoin
The reason that Terra uses stablecoins is to bring ForEx exchanges closer to their cash equivalents and to lower transaction fees. Merchants can accept payments in Terra for as little as 1% of the value of the purchase. They can also receive payments within six seconds, compared to the seven days required by credit card payments. This is an appealing benefit for both merchants and investors. There are many benefits to Terra, but what makes it stand out from other coins is its ability to provide these services and a stable ecosystem.
As a stablecoin, LUNA has the potential to provide an easy way for retail investors to make money in the crypto world. The Terra network has already partnered with a number of retailers, so the ecosystem has created multiple stablecoins. LUNA, for example, has been crafted to help the community participate in the governance of the Terra network and the collateralizing mechanisms. LUNA is also used as the Terra network’s validator, based on Proof-of-Stake consensus mechanisms.
Despite its recent collapse, Luna has managed to regain some of its lost value. The stablecoin topped out at $120 in April, but today, the price is only worth $0.000105 cents. Moreover, the future of the cryptocurrency market is highly uncertain, as regulators are now closely scrutinizing them. In the meantime, investors and traders should tread carefully. There are some lessons to learn from Terra’s experience.
The LUNA token of Terra is available on a variety of cryptocurrency exchanges. Binance, KuCoin, Bitfinex, Kraken, and Gemini all offer trading pairs with Terra. Among the most popular trading pairs are with local fiat currencies and Tether. Terra is also traded on OKCoin, where a mandatory Know Your Customer (KYC) process is required. This is an advantage for investors who are new to cryptocurrency and are looking for a stablecoin alternative.
It was linked to TerraUSD
If you’re wondering why UST and Terra Luna Crypto were linked, you’ve come to the right place. The two currencies are linked with the same utility token, TerraUSD, and UST is the most popular stablecoin on the market. The two cryptocurrencies have different mechanisms to maintain their dollar values. For example, UST uses an “anchor savings” protocol to maintain its peg to the US dollar. It is an important role of the LUNA token in keeping the UST pegged to the dollar and reducing volatility in the market.
The LUNA token is available on several exchanges, including Binance and KuCoin. Trading pairs for LUNA include BTC, Tether, and USDT. However, some exchanges require that you undergo Know Your Customer (KYC) processes before you can trade. In order to avoid this risk, it’s best to store LUNA on a wallet that you own or control. You shouldn’t keep it on exchanges, but rather use an exchange wallet that you control.
After purchasing LUNA, you can either burn it or keep it as a stake. Essentially, this process removes LUNA from circulation and deposits the remaining amount in a community treasury. This process will continue until the UST reaches $1.00 and more people are willing to spend their TerraUSD. That way, you can earn a profit while simultaneously reducing your losses. It’s all part of the Terra ecosystem’s incentive system.
The UST freefall erased $50 billion of paper value and sparked a crypto market bloodbath. Other crypto coins were likely to be hit by the UST death spiral, as investors are already wary of high-risk assets. After the UST deplag, Terra is planning to airdrop new luna tokens to its users beginning this Friday. The crypto exchange previously said it would distribute 1 billion new luna tokens. About 30% of the tokens will be distributed to community investors.
It wasn’t properly backed by cash reserves
When the cryptocurrency boom and bust began, it was easy to see that Terra Luna Crypto was not backed by cash reserves. However, Kwon had smart money on his side. Several crypto whales supported the project, including Galaxy Digital and Pantera Capital. Since these firms don’t usually make mistakes, they overlooked Terra’s flawed design. And that’s why it’s so easy to understand why Terra’s price crashed so dramatically.
The Terra coin dump was an accidental, if not intentional, act that caused panic. Smart investors continued to trust BTC, and the major crypto assets recovered from the crash. Despite the crash, the project didn’t pose an existential threat to the industry. The key to understanding why Terra fell in price is to avoid making the same mistakes in the future. While it may seem like a big mistake today, you don’t need to be worried about the future of crypto if you have the right mindset.
Even before the crash, traders alleged that LUNA was a ponzi scheme. There wasn’t enough cash reserve for the LUNA to support the price. While the LUNA Foundation Guard was reportedly the largest Bitcoin holder in the world, this was insufficient to support the LUNA price. There were also rumors that the LUNA Foundation Guard held over $4 billion in Bitcoin.
The Luna Foundation Guard, led by co-creator Do Kwon, decided to use this backstop strategy this weekend. The guard purchased more than 80,000 bitcoins, worth almost $3 billion at last week’s price. Terra also sold 33,206 bitcoins to LFG directly, to ensure that the price would fall back to parity. So far, this backstop has proven to be the right decision.
Its price began to fall due to the selloff of UST
It’s no surprise that the price of Terra Luna Crypto (LUNA) fell due to the selloff of UST. UST is a part of the Terra protocol, and if UST goes bad, it could spell bad news for LUNA. Unfortunately, the selloff also caused the supply of LUNA to skyrocket in an effort to keep the UST price steady. That only resulted in lower value for LUNA, as the UST price fell even further. By late spring 2022, LUNA dropped from almost $90 to about $1.00.
There are a few things to keep an eye on, though. First of all, the UST has a history of losing its peg, regaining it, and falling in price. If it continues to fall, it may be difficult to convince investors that Terra is worth buying. If this happens, however, it’s important to keep an eye on Terra’s price as it may become relevant again.
On Sunday, UST lost its peg and the LUNA token’s price plummeted, dropping under $30. This could have led to a death spiral, but the Luna Foundation Guard intervened, allowing the LUNA token to recover from its initial plunge. As a result, the price of LUNA was down by around 20% in the days following.
In addition to the UST selloff, other investors have been forced to make a decision about Terra. Some of the most prominent investors have become quiet in the past week. The billionaire founder of Galaxy Digital, Michael Novogratz, has not tweeted in a week. However, if he does decide to bail out, it’s important to understand that he has already lost over 40 percent of his portfolio.
It will be replaced by Luna 2.0
The cryptocurrency market is abuzz about the upcoming replacement of the original Terra coin by the new Luna 2.0. The old version of the coin has seen a collapse in price, and its co-founder is now being investigated by South Korean prosecutors. It is likely that the new version of Terra will fill in the gaps left by the previous version, but there is one big question mark: will it succeed? It seems unlikely, but the future will tell.
Although the proposed successor to Terra is an entirely new project, it will carry over no data from the current chain. The revived plan was approved by Terra network validators but pushed live despite the negative poll results. It was noted that 92% of the over 6,220 people polled were against the hard fork, with the most popular response being “no fork”.
The new token will replace the original Terra currency, which was created by Terraform Labs. The LUNA/UST cryptocurrency suffered a major crash in May 2022, leading to a hard fork of the original blockchain and the creation of a new cryptocurrency called Luna 2.0. The new version of Luna will replace LUNC and will be known as LUNA. In addition to the new token, the original Luna coin will remain in circulation.
Coinbase has suspended trading in the LUNA currency. The company has also halted trading in the WLUNA Ethereum token, which represents Terra LUNA. Coinbase Pro, Coinbase Exchange, and Coinbase Cloud will no longer support the Terra. Neither Coinbase nor its partners have announced plans to list Luna 2.0, so users should not hold on to the current version of LUNA until the new one is launched.