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What Is Terra LUNA? LUNA Coin Explained

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cryptocurrency LUNA

When the UST supply falls below $1, LUNA increases the supply to keep the UST pegged to the dollar. The failure of the algorithm stablecoin TerraUSD and its sibling token Luna sent tremors through the crypto-verse, driving cryptocurrency prices to fall and aggravating the entire system. Recently, TerraUSD plunged from its predicted 1 to 1 stake to the dollar, taking Luna down with it. A risk asset market cleared up digital forms of money, prompting cryptocurrency financial investors to be concerned about the monetary impact of forced bank regulation. The crypto market downturn, which began in April 2022, has already knocked out large sums in the market rate. Digital currencies are notorious for their volatility, and difficult economic conditions are putting a strain on crypto, as well as the stock exchange. However, when it comes to security, there are ways to maintain a safe and secured trading journey.

Luna, the sister cryptocurrency of controversial stablecoin TerraUSD, has collapsed to nearly $0. On top of the UST saga, crypto markets have been hit by a number of other headwinds including higher inflation and interest rate hikes that have caused a sell-off in global stock markets which has filtered through.

What Really Happened To LUNA Crypto?

The total capitalization of the stablecoin market has risen from US$38 billion in 2021 to more than US$180 billion now. The collapse of those digital currencies erased more than $50 billion in market value.

cryptocurrency LUNA

However, the security of those coins has always been a source of concern. To begin with, over $15 billion in crypto valuation has been cleared out entirely through Luna and UST. Many of those who were introduced to Luna and UST had massive portions of their crypto assets auctioned off to regain some of the losses, bringing down the market with them. Reuters reported that Bankman-Fried secretly transferred $10 billion in FTX client funds to help prop up Alameda’s risky bets before the cryptocurrency exchange fell into bankruptcy. Most of the sell orders for Terra USD originated from the cryptocurrency trading firm Alameda Research, a source with knowledge of the situation told the Times.

What is Luna crypto exactly?

One retail crypto investor even confessed that they lost their savings of $20,000 in Luna. Luna plunged to $0 Friday, according to data from CoinGecko, marking a stunning collapse for a cryptocurrency that at one point was worth more than $100. Blockchain Council is an authoritative group of subject experts and enthusiasts who evangelize blockchain research and development, use cases and products and knowledge for a better world. Blockchain Council creates an environment and raises awareness among businesses, enterprises, developers, and society by educating them in the Blockchain space. We are a private de-facto organization working individually and proliferating Blockchain technology globally. Blockchain purists mostly criticize terra for being less decentralized than other networks. The Ethereum network’s 3,038 validators vastly outnumber its 130 validators.

UST is an algorithmic stablecoin which uses code to maintain its price at around $1 based on a complex system of minting and burning. A UST token is created by destroying some of the related cryptocurrency luna to maintain the dollar peg. Before we look at this crypto disaster, we need to discuss stablecoins briefly.

  • You may have heard of TerraUSD and Luna, here is a quick breakdown of what they are exactly.
  • One winner that we have to highlight is the hedge fund Pantera Capital.
  • Stablecoins have developed as a vital component of the cryptocurrency ecosystem, bridging the fiat-to-digital currency divide.
  • As more people buy into UST, more luna would be burned, making the remaining luna supply more valuable.
  • Indeed, Powell’s hawkish tone seems specifically designed to present a melt-up rally in stock markets into the year-end that could juice the economy , thus making the Fed’s inflation fight more difficult.
  • The cryptocurrency market is in turmoil, exacerbated by the collapse of luna and the UST stablecoin, both tied to the terra blockchain.

When not writing, Daniel Van Boom practices Brazilian Jiu-Jitsu, reads as much as he can, and speaks about himself in the third person. On September 15, it was announced that a court in South Korea had issued an arrest warrant for Do Kwon. This came almost four months after the collapse of Luna LUNA and UST, the two tokens that Terraform Labs issued. Do Kwon and five other people are currently accused of violating local market laws. Following this crash, crypto exchanges started to delist Luna and UST pairings. Once a large amount of UST had been offloaded, the stablecoin started to depeg.

What is Luna: the cryptocurrency that lost 99% of its value?

Terra intends to solve this problem by establishing a price-stable digital currency ecosystem that allows for faster and less expensive transactions. While ethereum’s blockchain natively produces ether tokens, terra natively produces luna. The Luna meltdown impacted the entire cryptocurrency market, which was already highly volatile and experiencing difficulty at the time. It’s estimated that the Luna crash ended up tanking the price of bitcoin and causing an estimated loss of $300 billion in value across the entire cryptocurrency space.

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It’s akin to the seigniorage that central banks earn from when they produce money. In April 2019, the white paper was issued for the blockchain the same month that the mainnet went live. According to the document, Terra is touted as a price-stable, growth-driven stablecoin that achieves price stability via an elastic money supply and stable mining incentives. The protocol also makes use of seigniorage, or the profit made from the creation of currency, to stimulate transactions and expand acceptance. Terra aims to provide easy-to-spend programmable money with minimal costs, rapid settlements, and cross-border transaction functionality. Terra LUNA coin has achieved all-time highs three times in the last month is quite astonishing.

The price movements of cryptocurrencies have been correlated to stock markets. The demise of controversial stablecoin venture Terra has resulted in a meltdown in the crypto market, which erased billions of dollars in value in a single day. The Terra network’s native tokens, LUNA and TerraUSD , are two blockchain-based projects developed by Terra Labs in South Korea. The Terra blockchain is based on the Cosmos SDK. This platform allows developers to construct unique blockchains and decentralized apps on top of Terra for various use cases. There are already over 100 of these domestically produced projects in the Terra environment.

TerraUSD was risky because it wasn’t backed by cash, treasuries or other traditional assets like the popular stablecoin tether. The stability of UST was derived from algorithms that linked the value to Luna. Many experts were skeptical that an algorithm could keep two tokens stable. Both Luna and UST crashed once UST lost its peg to the dollar, which was what qualified it as a stablecoin. The UST coin was not backed by an actual US Dollar but rather an algorithmic stablecoin. The belief was that Terraform Labs could use clever mechanisms along with billions in Bitcoin reserves to maintain the peg of UST without the backstop of the USD. When the Luna crypto network collapsed, it’s estimated that $60 billion got wiped out of the digital currency space.

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