The value of the Luna coin plummeted along with the stable coin TerraUSD. Both tokens are tied to Terra, the blockchain platform founded by Do Kwon, a Korean developer. According to analytics firm Elliptic, investors have lost about $42 billion because of them.
Luna is one of the most popular cryptocurrencies in the world. Its free fall along with TerraUSD caused an “earthquake” across the entire crypto community. Bitcoin also lost about a quarter of its value in just a few days, from May 9 to 12.
Once trading for nearly $100 at the end of April, Luna is now down to about 1 cent, so low that many expect it to resurrect from the ashes. Some investors believe that Luna will not collapse.
“Luna used to be in the top 10 coins by market capitalization, so they will do everything they can to recover,” one investor wrote on the Naver platform, but did not say who “they” here are. . This blogger said he bought 300,000 Luna over the weekend for 0.33 won ($0.0003) through an international exchange.
Seeing the sudden increase in the number of Luna buyers, the Korean Financial Services Commission (FSC) had to warn. According to a source at FSC, in just 2 days, up to May 15, on major Korean exchanges, the number of investors buying Luna increased by more than 50%, reaching 280,000 people. Buyers mainly live in the country, a small percentage come from abroad.
Bithumb and Upbit, two of the largest exchanges in the country, announced that they will stop supporting Luna trading on May 27 and May 20, respectively, while Coinone has suspended related operations. to Luna and can remove it from the exchange on 5/25.
The active trading activity doesn’t seem to have had a big impact on Luna’s price. Over the past week, Luna has fluctuated around less than 1 cent. However, the tendency of Koreans to invest in volatile and risky assets, from cryptocurrencies to stocks, especially among young people, has investors worried.
The enthusiasm of investors has helped Luna and TerraUSD enter the list of the world’s largest cryptocurrencies by capitalization. But everything turned 180 degrees on May 10, when TerraUSD lost the 1:1 peg to the USD. On May 18, the price of TerraUSD was about 10 cents.
Unlike other stablecoins that are pegged to real assets, the value of TerraUSD is determined by a complex algorithmic process and linked to the Luna token. In the system, 1 TerraUSD token can be exchanged for 1 USD Luna and vice versa. If TerraUSD falls below 1 USD, traders are incentivized to buy the stable coin to exchange it for 1 USD Luna, thereby reducing the supply of TerraUSD and pushing the price back to 1 USD.
It was in theory, but the market proved the theory wrong. When the market crashed, hundreds of retail investors vented their anger on social media, some demanding Mr. Kwon compensate for the loss.
Last week, Kwon announced a plan to change the system to rescue Luna and TerraUSD, but it is unclear if it will be achieved. Meanwhile, the government has not done much to protect investors since cryptocurrency trading takes place outside of the legal sphere.
According to Reuters