As a result of attempts to return the TerraUSD (UST) peg to the US dollar, the Luna Foundation Guard (LFG) lost about $3 billion, according to information The Block analyst Larry Cermak. Before the collapse of the altcoin, the total value of the coins in the fund reached $3.1 billion, by the current moment it has decreased to $268.3 million, and excluding the project’s own tokens, to $87 million, writes RBC Crypto.
After the publication of LFG reporting, the cost of UST and Luna tokens continued to fall. The price of the stablecoin has fallen to $0.05, the Luna rate to $0.00013 (last week it reached $80). The company emphasized that it plans to use the remaining assets to offset the losses of holders of small amounts in UST.
UST lost its peg to the US dollar on May 8, when there was a sharp outflow of assets from the Anchor protocol, as a result of a decrease in the rate of return on deposits to 17.87%. LUNA, which is used to stabilize the price of UST, also suffered. Altcoin emission increased to 6.9 trillion tokens.
The risks of non-recovery of the price of tokens are quite high, says Nikita Zuborev, senior analyst at Bestchange.ru. He explained that the dilution of value occurred against the backdrop of an uncontrollably inflated issue of the token, which in theory should have compensated for the reduction in the cost of UST collateral, but only exacerbated the fall. Also, the reputation of the development team was seriously affected.
“Even after a single case of such a large-scale failure, the credibility of their future projects will be undermined, and in the conditions of the “information war” that was launched around Do Kwon, this effect will increase many times over. In addition, the journalists managed to find out about the direct connections of the Terraform Labs team with the previously “ruined” algorithmic stablecoin Basis Cash (BAC),” Zuborev explained.
He recalled that the CEO of the project himself said that he was unlikely to be able to “restore the entire ecosystem completely” and suggested that the community deliberately abandon the price parity of UST with the US dollar, which, at best, would lead to multimillion-dollar losses for stablecoin holders. Any such plan will not bring any serious results to the parent asset of the Terra project (LUNA), the expert added.
According to him, we can expect Terra’s price to recover to some extent after the start of active actions to restore the ecosystem. At the very least, by drastically reducing the issuance, reprioritizing, and using unspent bitcoin reserves from the Luna Foundation Guard stabilization fund, a serious technical impetus for the price of LUNA can be created, and some late investors will be able to earn several tens of percent, provided that the strength of the sale of early investors ( those who have lost more than 99%) will not outperform the purchase.
“In any case, such a “trail” of deceived investors will not allow the project to develop stably in the long term with any recovery plan,” Zuborev is sure.
Alfacash director Nikita Soshnikov agreed with him, who also sees no long-term prospects for Luna. According to Soshnikov, in this case, you can only buy a “deliberately failed project” in the hope of then selling it to “hamsters” who are still in the stage of denial and hope for a revival of the project.
“The reputation of Luna and UST has been lost forever, too much negative information about the founders, their manipulations, previous projects has appeared in the information field,” the specialist emphasized.
He called Terra the “most hated” project in the crypto space. According to Soshnikov, the failure of the altcoin had a negative impact on the market as a whole, so there is no hope for an early rise in the bitcoin rate, and new legislation will appear in the industry that will tighten regulatory oversight of stablecoins.
The idea of maintaining the rate of a decentralized stablecoin with the help of cryptocurrency reserves has, as expected, collapsed, Roman Nekrasov, co-founder of the ENCRY Foundation, believes. He noted that the tokenomics on which the value of Luna was based, including the Anchor protocol, which promised 20% per annum for UST staking, raises questions.
“I don’t see prospects for recovery in Luna and UST, the confidence of market participants has been undermined. The collapse of UST provoked a domino effect and a collapse in the crypto market, pulling other cryptocurrencies with it and, perhaps, will be the first in a series of bankruptcies of other stablecoins,” Nekrasov predicted.
Stay in touch! Subscribe to World Stock Market at Telegram.