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The Cryptocurrency Terra Luna: What Happened? [A 2022 Flash Crash]

The cryptocurrency Terra Luna: The purpose of this deflation protocol was to ensure Luna’s lengthy development.

The UST stablecoin and Luna, both of which are necessary for the Terra blockchain, are interlinked in this story. The UST coin was supposed to always be worth $1, but it was de-pegged in 2022 and is now only worth 13¢. Then there’s Luna, the epicenter of the Terra ecosystem. Its value has plummeted in one of the most spectacular crypto catastrophes ever seen. Over $15 billion in cryptocurrency has been lost, and the collapse has prompted issues about stablecoins in general.

The cryptocurrency Terra Luna: The purpose of this deflation protocol was to ensure Luna's lengthy development.
Source: Pexels

The cryptocurrency Terra Luna: What is the Terra Blockchain: Luna & UST

Like Ethereum and Bitcoin, Terra is a blockchain. While the blockchain of Ethereum distributes Ether tokens, Terra generates Luna. You need to burn a lot of Luna to make UST stablecoins. The purpose of this deflation protocol was to ensure Luna’s lengthy development. As more people join UST, more Luna will be burned, increasing the value of the excess Luna supply.

The cryptocurrency Terra Luna: What Exactly Happened?

More than $2 billion in UST was withdrawn from the Anchor Protocol in May 2022, and countless others were sold almost instantly. The interest rate rise has had a significant impact on currency values. The value plummeted to 91¢ as a result of such incredible discounts. Brokers tried to take advantage by trading 90¢ worth of UST for one dollar worth of Luna, but only $100 million worth of UST can be traded for Luna per day. When the stablecoin’s stake couldn’t be maintained, investors rushed to sell their UST. Soon after the initial de-peg, it jumped between 30¢ and 50¢, but it has since dropped to a steady low of under 20¢. Its market capitalisation, which was about $18 billion in early May, is now $2 billion.

For Luna investors, it’s even worse. The value of luna tokens has completely vanished. Some assume that an aggressor attempted to breach UST in a disastrous attack in an attempt to benefit from short-selling bitcoin or betting on its price drop. If the alleged aggressor caused a massive scenario in UST and immediately unstaked $2 billion, it may de-peg the stablecoin, which would require Terra’s organization to sell some of its bitcoin assets to re-peg the stablecoin.

The cryptocurrency Terra Luna: Impact on the Crypto Market

The cryptocurrency market isn’t always a safe haven. You can see a red downturn if you glance at it. Digital currencies are notorious for their volatility, and difficult economic conditions are putting a strain on crypto, as well as the stock exchange. Unpredictability is intrinsic in crypto. However, when it comes to security, there are ways to maintain a safe and secured trading journey. While you cannot be 100% free from cases like Terra Luna, there are other ways to drastically avoid it. Crypto platforms like Bitcoin Profit and Coinbase claim to have a system in place that helps investors trade only cryptocurrencies with a verifiable track record. While the supported system cannot promise certain profits, it helps you steer clear of becoming another victim.

Meanwhile, the rapid depreciation of the TerraUSD stablecoin has shocked the crypto community. Following an influx of selling pressure, the Terra blockchain was stopped and then resumed twice. While the chain is up and going again, there are initiatives to keep it operating, including a plan by co-founder Do Kwon to relaunch a version of Terra blockchain minus UST, which may depict Luna approaching extinction. In the meantime, several of its features have been hampered.

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 (UST) 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 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.

Source: Pexels

The cryptocurrency Terra Luna: Why is It a Big Deal?

To begin with, over $15 billion in crypto valuation has been cleared out entirely through Luna and UST. However, the destruction is not confined to the ecosystem of Terra. 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.

Second, it leads to increasing concerns about the use of other stablecoins. UST was often unique in that it would be algorithmic. However, the security of those coins has always been a source of concern.

Finally, and perhaps most importantly, the failure of UST has got the interest of prominent legislators and administrators. UST’s de-pegging, according to Secretary of the Treasury Janet Yellen, essentially defines that stablecoins are quickly evolving items with quickly evolving risks.

Terra Luna Price Prediction: $LUNA Falls, Time to Sell?

The cryptocurrency Terra Luna: The purpose of this deflation protocol was to ensure Luna's lengthy development.

Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

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