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    HomeBusinessThe great fall of Luna and its impact on crypto market

    The great fall of Luna and its impact on crypto market

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    The token value of Luna fell from $80 to below $0.002

    On May 13, Luna – one of the cryptocurrency’s crash raised concerns around the globe.  According to a statement by the Luna Foundation Guard (LFG), the non-profit organisation’s cryptocurrency reserves fell from around 80,000 to around 300. As a result, several investors were left exposed to volatile market conditions. 

    Industry experts attributed this fall in Luna’s value to factors such as the whale dumping of tokens – – which refers to participants such as foreign institutional investors who are bulk buyers and sellers – – as this led to a state of panic around retail investors. “The question revolves around blockchain technology’s ability to handle such shifts in market sentiments. While algorithmic stabilisation of stablecoins cannot be ruled out, it is necessary to make the technology resilient during such situations. Terra’s downfall taught us the need to focus more on building rather than on earning,” Aliasgar Merchant, developer relations engineer, Ignite, a blockchain development company, said.

    Moreover, TerraUSD’s (UST) – a stablecoin built on the Terra blockchain downfall did not affect the stability in the value of other stablecoins which are related to fiat currencies. Despite the impact caused by the decline in UST’s value, stablecoins were backed by investors’ confidence via the involvement of fiat currency such as the US dollar. “Due to investors unstaking over $2 billion worth of UST and also selling them, the pegged price of UST went from about a dollar to 91 cents. While speculators tried to take advantage of the situation by converting 90 cents of USTs into a one dollar worth of Luna coin, it further eroded the value of Luna,” Pratik Gauri, founder, 5ire, a blockchain platform, said.

    Interestingly, as per various reports, just before the decline, Luna also saw an increase in the demand. This is correlated with the earlier increase in Terra’s value. These spikes were caused due to hoarding of Terra prices for extra earning from related investments, Raghav Gupta, founder, EquiDEI, a decentralised finance (DeFi) company, said. “It’s always a case of demand and supply between Terra and Luna prices. As a result, demand for these stablecoins soared and their prices fell off to 80%. My understanding from this whole situation is that like any other investment option, cryptocurrency investments need careful study, planning, and execution,” he added.

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