Home » Why did LUNA hit ZERO what actually happened to Terra?

Why did LUNA hit ZERO what actually happened to Terra?

by Sonal Shukla

In the month of May, the crypto world saw one of the biggest crashes to take place. LUNA, the native token of Terra crashed to nearly zero. This crash came with a great magnitude. It almost wiped over $40 billion of the wealth of different investors within a few days. Such a crash happened from UST, the algorithmic stable coin’s bad performance. The coin was pegged to $1 which is lost. Thus it eventually crashed down. It landed at less than the price of a cent. Thus, the validators of Terra selected to pause the network, preventing the production of the block. Various popular cryptocurrency started to delist UST and LUNA. It was for stopping traders to make losses by taking any risky position. 

An overview of Terra LUNA

  • LUNA is known to be Terra blockchain’s native token.
  • The algorithmic stable coin, TerraUST works by following LUNA to keep up with its $1 price.
  • This UST token is mainly linked to the US dollar.
  • This is because most of the stable coins are linked to a fiat currency or the other.Trade Cryptos stable coins and other coins on the most trusted platform Bitcoin smart
  • It does not depend on any stored asset to determine its worth.
  • Yet rather produces it by observing a bunch of guidelines. 
  • A specific measure of LUNA gets burnt each time the cost of UST falls below $1.
  • So a price recovery can take place. 
  • The opposite happens when the price is more than $1. 
  • Under such a mechanism, this stable coin keeps up with its price.

The current situation of TerraLUNA

  • As it has been already mentioned before, for TerraUST to keep up with its $1 peg, it should be minted or else burnt. 
  • Thus if you wish to purchase TerraUST, you need to start minting them by paying one going rate via LUNA. 
  • Then these LUNA are burnt.
  • Subsequently, the LUNA price goes somewhat up because of the contraction of supply. 
  • This definite method of conversion can likewise get applied to the coins backward.
  • A huge UST dump of $285 million started a cascading type of influence of shorting this asset.
  • The underlying dump was huge.
  • It was supplemented by various dumps of an extensive extent as the news created a buzz on Twitter. 
  • Thus LUNA and UST’s prices began showing a descending pattern.
  • For stabilizing the peg of UST, the foundation of Terraform liquidated every of its Bitcoin holdings of 40k. 
  • The foundation was among the main 10 holders of Bitcoin. 
  • Because of this, the Bitcoin price saw an unexpected fall too.
  • By May 12th, its price reached a low of 10-month. It was $26,350.49. 
  • Such behavior was lined up across most digital currencies.  
  • The crypto markets became red candles’ hosts.
  • The total cryptocurrency market was draining enhancing the previously plummeting LUNA price.
  • It fell under a dollar after its $119 ATH last month. 
  • Before long, LUNA’s price fell by close to 99% on numerous occasions.
  • At last, it arrived at an unsurpassed low of $0.000000999967, very nearly zero.
  • In the month of April, at its untouched high, LUNA’s market cap remained at an incredible $40 Billion. 
  • Be that as it may, it remains at a simple $979 million. 
  • The crash figured out how to clear just about 40 billion dollars off the pockets of investors.
  • LUNA and Terra supply’s hyperinflation was the significant reason for the price falls. 
  • Before this crash, LUNA tokens of 350 million existed.
  • But after this huge crash, it saw an increase to 6.9 Trillion. 
  • The expansion in supply is, somewhat, unexplainable.

Conclusion

In the middle of the crypto crisis, different crypto exchanges started to delist or pause UST and LUNA trading. Among some of these platforms were Crypto.com and Binance. They chose to pause LUNA trading. Similarly, eToro decided to delist this token then. Now LUNA is available for trading on eToro. Huge shorting, UST failure for maintaining stability, crypto market sentiment, trade halting, and some minor reasons were everything it took for making the LUNA crash occur. Currently, the token is trading at $0.00015. It is fairly volatile. Right now it may be not the best asset for trading if you consider all risks involved. However, if you wish to trade, do it on eToro. They will charge no transaction fees. The platform also accepts many methods of payment for making a fiat deposit. So make informed decisions. 

 

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