In the currency circle that is going through a new round of cold winter, another popular currency has collapsed simultaneously. The LUNA coin, which was once called "Moutai in the currency circle" by players in the currency circle, has been bloodbathed recently. This cryptocurrency has soared from the lowest point of 0.12 US dollars to 119.5 US dollars, and the circulating market value once ranked fifth in the entire network. In the market It plummeted amid the popularity.
html On May 10, the two leading cryptocurrencies, Bitcoin and Ethereum, suffered another 10% drop and then struggled to stop the downward trend and slowly recovered. The overall market value of cryptocurrencies across the entire network has also shrunk further. In the midst of the downturn, LUNA currency, which plummeted by 45%, has received widespread attention, and the term "LUNA currency plummeted" has also appeared on many platforms' hot search lists.
reporter noticed that in related discussions, some netizens commented that they purchased 1,200 LUNA coins at a low price on May 11 and planned to hold them for a long time and wait for their value to rebound. On May 11, Luna coin opened at US$31.4, and the currency price dropped to as low as US$3.6. As of 18:00 that day, LUNA currency was trading at US$3.72, an intraday drop of 87.62%.
This also means that if the above-mentioned netizen really purchased 1,200 LUNA coins as stated in his comments, even if the lowest price of LUNA coins on May 10 is 24 US dollars, the netizen will still face a high amount on May 11 If there is a loss, the asset volume will drop by 85%.
LUNA currency trend in the past 24 hours
According to data from the global currency price website CoinGecko, LUNA currency was launched for online trading in May 2019, with an initial trading price of US$2.42. LUNA currency has been falling all the way since its launch. The currency price has been less than 0.5 US dollars for a long time, with the lowest price in history being only 0.12 US dollars. Until the beginning of 2021, the cryptocurrency market as a whole was booming, and LUNA currency was also rising all the way, with an increase of more than 800% in 2021.
In April 2022, LUNA coin hit a record high price of US$119.18, and its circulation market value ranked fifth on the entire network. Labels such as "Coin Circle Moutai" made it even more popular. Just after LUNA coin hit its highest price in history, the cryptocurrency market cooled down significantly, Bitcoin turned downward, and LUNA coin also faced a collapse.
In just two trading days, LUNA currency fell from nearly $60 to $4. As for the reason for this situation, Jiang Zhaosheng, a senior researcher at Ouke Cloud Chain Research Institute, said that the violent price fluctuations of LUNA are mainly due to the de-anchoring of the price of the algorithmic stable currency UST. Coupled with the impact of external factors such as the sharp decline in and in the US stock market, the entire crypto market has become increasingly panicked. LUNA has been under greater selling pressure and its price has begun to fluctuate violently.
Reporters learned that UST is the third largest stablecoin in the cryptocurrency market, and its price has previously remained floating around US$1. Since May 10th, UST has also plummeted, and it once fell to $0.21 on May 11th, which is far from its "stable currency" attribute.
Due to the Terra network congestion caused by the plummeting of LUNA coins, which resulted in the accumulation of a large number of pending withdrawal transactions, the cryptocurrency exchange Binance once announced on May 10 that it would suspend the withdrawal business of LUNA and UST tokens. Judging from feedback from some users in the currency circle, related businesses have been restored.
Jiang Zhaosheng told reporters that currently, the more common legal currency-backed and crypto-asset-backed stablecoins in the encryption market maintain the price stability of stablecoins by using legal currency, cryptoassets or other assets as value collateral, such as USDT. It is to maintain a 1:1 anchor relationship with the U.S. dollar by pledging assets such as the U.S. dollar.
"UST is an algorithmic stable currency, which theoretically does not need to rely on other mortgage assets, but maintains price stability by adjusting the supply and demand relationship in the market." Jiang Zhaosheng explained that LUNA is an important puzzle piece that helps UST anchor the mechanism. . LUNA and UST are both original tokens in the Terra public chain ecosystem.
According to its operating mechanism, when the UST market demand increases and the price is higher than 1 US dollar, the user can send 1 US dollar of LUNA to the system (LUNA is burned) and exchange for 1 UST (UST is minted). On the contrary, when the UST demand When the price drops and the price falls below 1 US dollar, users can send UST to the system (UST is burned) in exchange for 1 US dollar of LUNA (LUNA is minted), thereby reducing the market supply of UST and restoring the anchoring relationship between UST and the US dollar. .
Jiang Zhaosheng pointed out that in both cases, users can obtain additional income through arbitrage, so under normal circumstances the market will spontaneously carry out arbitrage operations to help maintain the endogenous power of UST anchored to the US dollar. However, if the crypto market encounters severe fluctuations or UST's credit is seriously damaged, this stable mechanism that spontaneously adjusts the supply and demand relationship through the market will fail, and large-scale liquidation events may occur, causing UST's credit to further collapse, and then Caught in a "death spiral".
Judging from the past performance of the currency circle, there are not a few cryptocurrencies that have experienced plummeting after rising sharply, and there are even farces in which they were cleared within 5 minutes. What is different from the past is that LUNA currency is closely related to the stable currency UST, and its collapse has also triggered market doubts about the cryptocurrency ecosystem.
“The de-anchoring of UST has once again raised doubts about the algorithmic stablecoin model in the market, and market sentiment has been greatly affected.” Jiang Zhaosheng said that in order to prevent UST from falling into a “death spiral”, the non-profit organization that supports Terra The Luna Foundation Guard (LFG) used a large amount of Bitcoin reserves to protect the market, which also caused Bitcoin to suffer greater downward pressure, and market panic further spread.
Jiang Zhaosheng pointed out that currently, UST is still in a state of serious de-anchoring, LUNA prices have also been falling, and the means available to LFG are also very limited. Under such circumstances, whether UST can restore its anchor relationship with the U.S. dollar in the short term will face huge challenges, and more external forces may be needed to recharge "credit." "The risks of cryptocurrency trading are huge. Ordinary investors should remain rational and avoid investing blindly. Especially in the current market with relatively high overall risks, do not buy the bottom at will." (Yue Pinyu and Liao Meng)
