Just a week ago, the LUNA cryptocurrency was popular and was trading above $80. Now its rate has collapsed to $0.00001, and many investors have lost money. The UST stablecoin is also in a deplorable state.
Apparently, the reason is in the very algorithm of returning UST by investors. When you try to return UST, they are burned, and in return, LUNA coins are issued in an amount equal in value to the burned stablecoins. At the same time, the lower the LUNA rate, the more coins will be issued.
Against the backdrop of decoupling UST from the dollar, many investors tried to return their stablecoins, which caused an avalanche increase in the number of LUNA. By data service Terrascope, on May 9, the number of coins was 386 million, yesterday it reached 176 billion, and currently exceeds 6.5 trillion. Therefore, such a drop in the LUNA rate is not surprising.
The largest cryptocurrency exchange Binance this night is almost completely suspended trading in pairs with LUNA – the decision affected both margin and spot pairs. At the same time, all the measures taken by Terra’s management to stabilize the situation did not help – after several attempts to restore, the UST rate continued to decline and now the stablecoin is trading at $0.19.
Against the backdrop of panic around UST and other stablecoins, the entire cryptocurrency market declined. So, yesterday, the rate of the first cryptocurrency fell to $26,700. At the time of publication, Bitcoin returned to levels above $30,000.