The price of LUNA started collapsing from Monday and still remains, as it dipped down to less than $16 per coin. Currently, stablecoin TerraUSD (UST) which is dollar-pegged coin is trading at $0.8, less than its $1.00 value peg.
Terra (LUNA) cryptocurrency in doubly serving as a governance token for the Terra blockchain. Moreover, the reserve asset made to preserve the stability of its various stablecoins.
According to what has been noted by Luna Foundation Guard (LFG), the TerraUSD, the most popular stablecoin, started began drifting off of its dollar peg on this Sunday. The organization tried to deploy some of the Bitcoin reserves to increase the UST’s price in order to fix the problem.
However, this solution to deploy some of the Bitcoin reserves has failed to save the stablecoin, and the value of the coin went down to $0.69.
What made the situation much worse, is that its destroyed value has created a huge arbitrage opportunity within the Terra ecosystem. The traders are encouraged to trade their stablecoins in, as every UST us always convertible for about one dollar of LUNA, just to decrease their LUNA on the market shortly after for a profit.
This action has probably related to the LUNA’s price death spiral, which has deeply fallen substantially even next to other damaged cryptos. If we compare the premier cryptocurrencies, The king cryptocurrency Bitcoin BTC and Ethereum ETH were down by 18% and 17% respectively this week.
Binance was forced to halt UST withdrawals from exchanges in the middle of the chaos, citing “network slowness and congestion”.
The Treasury Secretary of the United States Janet Yellen, did clearly mentioned the de-pegging of TerraUSD during a senate hearing today. She believes it illustrates how stablecoins pose “risks to financial stability” and “need a [regulatory] framework”.
LUNA is now considered as the largest 20th cryptocurrency in the market capitalization, despite the fact of being one of the top 10 cryptocurrencies days ago.
However, Do Kwon the Terra’s co-founder did state today that he is about to unveil the plat to recover UST’s peg soon. Read more [Another $1.5B of BTC Was Purchased by Luna Foundation Guard].