Luna, the sister cryptocurrency to the contentious stablecoin TerraUSD, has plummeted to nearly $0.
TerraUSD, or UST, has lately captured the spotlight after the supposed stablecoin, which is alleged to be pegged one-to-one with the US dollar, dropped strongly below the $1 mark.
UST is an algorithmic stablecoin that utilizes code to retain its price steady at about $1 through a complicated system of minting and burning. To keep the dollar peg, a UST token is created by destroying some of the related cryptocurrency luna.
Unlike competitors Tether and USD Coin, UST is not backed by any real-world assets such as bonds. Instead, Terra’s founder Do Kwon’s nonprofit, the Luna Foundation Guard, has about $3.5 billion in bitcoin on hand.
Nevertheless, in times of market volatilization, like this week, UST is being explored.
Its peg has been broken, and investors right now are hurrying to sell the linked luna token. As per Coin Metrics specifics, the price of Luna fell from around $85 a week ago to around 4 cents on Thursday, making the cryptocurrency nearly futile.
Binance, one of the world’s biggest crypto exchanges, declared on Thursday that the Terra network, the blockchain linked with the luna token, is sluggish and crowded. As a result, Binance announces a great volume of impending Terra network withdrawal transactions on its exchange, implying that investors are hurrying to sell luna.
Because of the clogging, Binance had to briefly stop luna withdrawals on Thursday before restarting them.
The TerraUSD squabble has escalated throughout the cryptocurrency market. This is a result of the Luna Foundation Guard possessing bitcoin as a kind of reserve. The organization may now be forced to sell off its bitcoin holdings in order to maintain the peg.
Bitcoin has dropped beyond 29 percent in the past seven days, plummeting below $26,000 at one point on Thursday to trade at its record low since late December 2020.
Tether, the world’s largest stablecoin, also fell below its $1 peg on Thursday, as cryptocurrency markets panicked.
