May 2022 is going like a nightmare for the cryptocurrency market as it is facing an unprecedented crash this week. At the time of writing, Bitcoin (BTC) price stood at US$30,442.12. The biggest loser among all cryptos appears to be Terra Luna (LUNA), which crashed over 99 percent on May 13, as per CoinMarketCap data. And the reason behind this is the 'de-pegging' of TerraUSD (UST) stablecoin.
Looking at the current state of LUNA where its price stood at US$0.00003527, it is hard to believe that was one more than US$100. In the past couple of days, LUNA investors were wiped out of 95 percent of their wealth. LUNA price is now around 99.96 percent below its all-time peak of US$118, as seen in April.
The Terra ecosystem has adopted UST as a stablecoin, leading to the interlinking of LUNA and UST. A stablecoin is linked to an underlying asset, such as precious metal such as gold, or the US dollar. UST has recently 'de-pegged' to US$0.45 from its value of US$1. This marked a drop of about 55 percent. Since both UST and LUNA are interlinked, the massive drop in UST value has resulted in LUNA's overall drop.
Do Kwon, the founder of Terraform Labs took to Twitter to announce that he has a recovery plan for the Terra tokens which he would announce soon. He also thanked his followers for the support and said he "didn't mean to be so quiet and needed to focus for some time". Kwon clarified that the recovery plan for Terra tokens was close to completion. Well, it is difficult for investors to believe anything at this point of time until they see some progress and improvement in LUNA's current state.
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