Terra (LUNA) holders are 96 per cent poorer than what they were 7 days back! LUNA price has fallen by over 96 per cent in the last 7 days to $3.36. In the last 24 hours itself, LUNA has fallen by around 90 percent, according to data on CoinMarketCap at the time of press.
Terra’s ranking has also alarmingly dropped to 37th in terms of market capitalisation. The fall in Terra’s price and ranking to such lows is more shocking because it used to be one of the constants in the list of top 10 cryptos on CoinMarketCap till a few days back.
Another popular crypto from terra fold, TerraUSD (UST) has also called by over 49 per cent in the last 7 days, of which over 44% fall has been recorded in the last 24 hours. UST ranking has also dropped to 15, below memecoin Shiba Inu.
LUNA has lost around 94 percent of its market share in the last 7 days, dropping over 82 percent in the last 24 hours.
Why LUNA and UST crashed?
The debacle started when Terra’s algorithmic-based Stablecoins TerraUSD, which pegged against the dollar, started falling. Crypto exchange Binance even temporarily stopped the withdrawal of UST and LUNA leading to a cascading effect on prices of both cryptos.
The current debacle has highlighted the problems with algorithmic based stable coins.
“Terra’s fall could be attributed to large scale selloffs of the LUNA tokens owing to the reported “de-peg” of the algorithmic stable coin. This sellof must have also got exacerbated with the market already being in a laregly bearish mode,” Anshul Dhir, COO and Co-founder of EasyFi Network told FE Online.
What to expect in future from Luna, UST?
As per current reports, the team managing UST and LUNA will have to prepare proactively to defend the stability of the $UST peg under these macro market conditions. The team has also mentioned some recovery plans.
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“It’s now a wait and watch to see how the markets progressively stabilise,” said Dhir.
Are algorithm-based stable coins unstable?
According to Dhir, algorithmic stable coins are still at the stage of evolution currently and are mere experiments.
Many different projects have been experimenting with this category of stable coins.
“Hence, there is an intrinsic risk associated with it; anyone who invests or has invested in them should not blame the project founders or the industry,” he said.
The risks associated which such experiments needs to be understood before putting your money in it. The risk lies not just with the founders when it comes to such experiments, but also with every user who partakes in the project.
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“Experimental algorithmic stable coins are volatile and it is believed that it will take some time to find a good algorithmic stable coin. Over a period of time such programmable money should be possible which ultimately is the end goal of decentralized finance,” said Dhir.