TerraUSD fell drastically, taking down Terra LUNA along with it!

The trillion-dollar crypto market is struggling! Major cryptocurrencies like Bitcoin, Ethereum, and Solana are struggling to retain their market dominance amid the dwindling volume of the global crypto market. Amid these tumultuous times, even, stablecoins have started to dive, making it even more difficult for investors to retain their faith in digital assets. TerraUSD dropped nearly 99 cents over the weekend, taking down its sibling token Terra LUNA by more than 95% over the past week. This surely indicates that there has been enormous selling pressure for the LUNA token and its stablecoin. Several crypto exchanges have extended support facilities to alleviate the arbitrage opportunities and end the sell-off season for LUNA and UST. Like Binance stopped Terra withdrawals from its exchange network. Besides, according to reports, KuCoin's Terra deposits and withdrawals were also exponentially overloaded, causing the funds to be stuck in limbo. To help eradicate the current complications, Terra Founder, Do Kwon, has developed a last-minute plan that might help regain TerraUSD and LUNA, their market relevance.

Currently, it is a massacre for the Terra investors, the profits of whom were slaughtered within a period of 48 hours. Quite similar to Bitcoin, the Terra LUNA hit the lowest value in a year. In the last couple of days, crypto has wiped out almost 95% of the investors' wealth. According to reports, the total market cap of Terra dived below the US$2 billion mark, making it the 64th largest cryptocurrency in the world, whereas, during its glory days, the crypto was the 8th largest in the world. Coming to UST, the stablecoin is an algorithmic coin that uses a critical system of minting and burning tokens to adjust and stabilize its prices. UST's price disintegrated under the sell-off pressure, and as the prices fell further down, more panic spilled over the market.

So, how is the Terra Founder attempting to re-stabilize the crypto's lost dominance?

UST lost its peg and fell below 66 cents and this resulted in a price drop in LUNA. To attempt to relieve LUNA and UST investors from their concerns over the crypto's future prospects. After quite a long time, the Terra Founder tweeted that the current price stabilization mechanism is absorbing the UST supply. He further explained how the TerraUSD price was related to the LUNA price, resulting in the diminishing value of the crypto. The trading strategy used by traders who buy and sell LUNA and UST should be customized in such a way that they are able to peg the stablecoin back and make a profit by doing so.

This dwindling condition of Terra is also affecting Bitcoin and other cryptocurrencies. According to reports, Kwon plans to buy US$10 billion worth of Bitcoin with the help of a non-profit foundation named Luna Foundation Guard. These funds will be aimed to provide support in case there is a dramatic fall in the value of Terra. The idea is that BTC would act as 'reserve currency' for Terra, in a similar way to how central banks hold large quantities of dollars and other fiat currencies in their foreign exchange reserves. The problem is, owing to the current market situation of Bitcoin, it might not a safe plan to re-establish the value of a cryptocurrency and a stablecoin. This might not only tumble the Terra ecosystem but might also cause challenges for Bitcoin and eventually the entire crypto market.

The Terra Founder is focusing on eventually allowing UST holders to redeem their tokens in exchange for Bitcoin. But this is still weeks away from being implemented, and the steps as to how the investors can carry out this initiative are also obscure. Only time can tell how much profit this initiative would bring, given the fact that most investors are currently dumping off their crypto tokens in search of better investment assets.

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