The crypto market is currently going through one of its most significant crashes. Thousands of people are selling out at a loss, but Terra’s LUNA investors specifically are enduring the worst. Within the last 48 hours, the Terra/Luna coin has crashed by 90%. This has come as a great shock to Terra investors since most have put their savings into the altcoin, only for it to value close to nothing.
On r/terraluna, a subreddit dedicated to the Terra and Luna cryptocurrencies, the pinned post reads, “For everyone panicking, here are some National helpline numbers.” It provides a list of hotline numbers, for each country, for the people mentally suffering from the Terra Luna coin crash.
One Reddit user shared, “My ex-colleague attempted suicide,” and explained that their ex-colleague lost all their savings in the crypto meltdown, where Luna was the primary asset in their portfolio. Whereas another user shared, “I lost over 450k usd. I cannot pay the bank. I will lose my home soon. I’ll become homeless.” It does not stop there. Since many more have shared similar struggles. The severity of the situation resulted in some swearing to never put a dollar into the crypto market.
Why Did The Terra (LUNA) Coin Crash?
To understand the Terra Luna coin crash, we must be familiar with Terra’s protocol. Its protocol consists of two tokens, the Terra coin, and the Luna coin. The Terra coin (UST) is a stable coin pegged to the US dollar. Whereas Luna is the coin used for staking. Unlike USDT, the UST coin is not backed by an equivalent fiat currency. So to ensure it remains stable, Luna stakeholders are advised to burn their Luna tokens to mint UST if the price increases. And burn their UST to mint Luna if the price decreases.
Luna’s crash came after UST lost its peg to the US dollar by 89.3% in today’s market. At the time of writing, UST is valued at $0.107 with a 24h change of -$0.495.
On the other hand, Luna is currently priced at $0.0007, when only last week it was valued at $80. On May 10th, its price was estimated at around $30, and in only 48 hours, Luna suffered a %100 loss.
The UST collapse began after a large number of the currency was sold. Consequently, it began to lose its peg with the US dollar, which led more people to sell UST in a state of panic. As a way to try and save the fiat-pegged currency, more Luna was minted. However, this resulted in a domino effect leading Luna to crash.
In addition, the famous crypto exchange, Binance, suspended Luna withdrawals on May 10th. According to its announcement, it was due to network congestion caused by the high volume of pending transactions. The platform was then heavily criticized by the public. Since some perceived it as a move made to protect Luna. However, Binance CEO, CZ, took to Twitter to explain his reasons behind the suspension of UST/LUNA transactions; he also claimed he was disappointed with how the Terra team handled the situation.
Will The Terra (LUNA) Coin Recover?
Founder of Terraform Labs, Do Kwon, expressed his grief on a Twitter thread over the UST/LUNA collapse, saying, “1/ I’ve spent the last few days on the phone calling Terra community members – builders, community members, employees, friends and family, that have been devastated by UST depegging. I am heartbroken about the pain my invention has brought on all of you.”
In the same thread, he provided a proposal for Terra’s ecosystem recovery. However, the plan focuses on protecting Terra’s user base and community. Do Kwon stated that validators should reset the network ownership to 1B tokens, and it will be distributed to Luna and UST holders before the depegging event. This recovery plan aims to preserve the Terra community by compensating them for their trouble. However, it does not ensure that Luna will ever regain its value.
The Terra/Luna coin crash is one of the most consequential cryptocurrency collapses, and its fall down created a ripple effect on the entire market. Although cryptocurrencies like Bitcoin and Ethereum are regaining their lost value, the Luna coin went from being among the top 10 cryptocurrencies to the top 1000. As a result, many crypto enthusiasts have lost their passion for the crypto world. On the other hand, some still have high hopes for what the crypto community will serve in the future.
Sally is a student of International Business Management and is interested in topics related to blockchain technology. She is an author for gBlogo’s “Crypto World” column and provides insight on topics related to cryptocurrencies and NFTs.