Terra, which was trading at $118 last month, boasting itself as the eighth largest crypto-token, was the worst of its day on Thursday when it tumbled down to $0.09 on Thursday.
Interestingly, the token saw maximum carnage in the last 72 hours, when its value dwindled from roughly $80 to fall out to merely a few cents.
Algorithm-backed stablecoin of Terra Network, UST, lost its dollar peg, which led to the crash in LUNA prices. UST and Luna are interconnected as for every UST traded, a LUNA is burned and vice versa.
Vikram Subburaj, CEO, Giottus Crypto Exchange, said that Terra got affected by investors losing confidence in the asset post the de-peg of its associated algorithmic stablecoin UST.
“LUNA, which is used to peg UST at $1 value, lost value as investors dumped the asset quickly, while its circulating supply was increased from 350 million to 2.5 billion in 3 days to help UST recover its peg,” he added.
The market cap to LUNA has slipped down in millions, less than $300 million to be precise. However, the volume of the LUNA token has been quite impressive as tokens worth $7.75 billion exchanged hands in the last 24 hours, the coinmarketcap data suggests.
Edul Patel, CEO and Co-founder of Mudrex, said that the crypto market is bearish already and it might have laid more pressure leading to the wealth destruction of the UST.
Market experts are still bullish on the future of LUNA and expect the token to recover in future. However, they believe that it may take some time to repeg UST and the pain might last longer.
Shivam Thakral, CEO of BuyUcoin, said the recent LUNA crash has revealed some major loopholes in the algorithm-backed stablecoins and the industry needs to act responsibly by addressing the concerns of the investors publicly.
“LUNA will take some time to recover from this shock and it will be a good idea to shift UST from algo to fiat-backed,” he added with hopes that the token will recover gradually.
Market participants believe that to stabilize this ecosystem, UST needs to move towards its $1 peg from its current $0.55 trade value, whereas LUNA will be distributed in this process and thus, LUNA’s unit value will likely remain modest.
The majority of the industry experts suggested that investors should not go all guns blazing in LUNA before it stabilizes after the carnage. One should avoid bottom fishing and hunt short term gains. Invest according to their risk appetite, they advise.
UST is likely to recover, LUNA will have to ride out for the longer term to regain its strength, said Subbaraj from Giottus. “However, increased supply will cap its gains. We don’t recommend investors to buy LUNA before UST re-pegs.”
Edul Patel from Mudrex suggested not to jump into any impulsive buying activity now, whereas Thukral from BuyUCoin said that investors should stick to the fundamentals of investing and invest as per their risk appetite.