The dip on luna currently is mind blowing. LUNA is the native currency of the Terra blockchain, a blockchain protocol that uses fiat-pegged stablecoins to power price-stable global payments systems. According to its white paper, Terra combines the price stability and wide adoption of fiat currencies with the censorship-resistance of Bitcoin (BTC) and offers fast and affordable settlements.
In the last seven days of trading, LUNA has lost its position as a top 10 cryptocurrency by market capitalization as it currently ranks #28 as of the time of this writing. Its token price traded $87.96 a week ago, to currently stand at $8.81 as of the time of this writing, which represents an approximately 90% decline in just seven days.
The shocking thing about LUNA is that it created an all-time high of $119.18 a little over a month ago and it has lost over 92% since then, making it one of the fast declines in the cryptocurrency space as over $37.4 billion in market capitalization has been whipped off in less than five weeks.
LUNA is the native currency of the Terra blockchain, a blockchain protocol that uses fiat-pegged stablecoins to power price-stable global payments systems. According to its white paper, Terra combines the price stability and wide adoption of fiat currencies with the censorship-resistance of Bitcoin (BTC) and offers fast and affordable settlements.In the last seven days of trading, LUNA has lost its position as a top 10 cryptocurrency by market capitalization as it currently ranks #28 as of the time of this writing. Its token price traded $87.96 a week ago, to currently stand at $8.81 as of the time of this writing, which represents an approximately 90% decline in just seven days.The shocking thing about LUNA is that it created an all-time high of $119.18 a little over a month ago and it has lost over 92% since then, making it one of the fast declines in the cryptocurrency space as over $37.4 billion in market capitalization has been whipped off in less than five weeks.
How the UST mechanism works
LUNA serves as a collateral asset to maintain UST’s dollar peg, according to Terra’s elastic monetary policy. Therefore, when the value of UST is above $1.00, the Terra protocol incentivizes users to burn LUNA and mint UST. Conversely, when UST’s price drops below $1.00, the protocol rewards users for burning UST and minting LUNA.This means, that during UST supply reduction, LUNA’s valuation should decrease. Similarly, when UST’s supply expands, LUNA’s valuation increases, noted Will Comyns, a researcher at Messari. On May 8, UST’s market underwent contraction for the first time in two months, dropping by 28.1 million below zero. Simultaneously, LUNA’s supply expanded by over 436.75 million above zero.The contraction and expansion seen on the day was a result of market participants who mass sold UST worth almost $300 million. This further continued as Bitcoin fell below $30,000 which caused the LFG foundation to initially deploy $1.5 billion to be loaned out to professional market makers to defend the UST peg. However, according to CoinDesk the foundation is scrambling to line up fresh capital to back the project.
What is happening now?
UST is still depegged as it is trading 30 cents as of the time of this writing. Down 70%.ANC, the native token of the Anchor Protocol, is down 72% in the last 24 hours.Terra blockchain, which had a TVL of over $31 billion at its peak, currently has $5.99 billion, down over 80%.Anchor Protocol’s TVL which peaked at $17.15 billion has lost over 76% as it currently stands at $3.99 billion.LUNA is down over 90% in the last seven days.
