In the crypto world, we’ve seen this before, where a coin went bust in a few hours. In 2018, the 7th largest cryptocurrency in the world went crazy, like some famous best online casino sites that went down. After hitting market capitalization in two years, the coin was trading at $197 each at 9:20 pm on January 16, 2018.
However, less than an hour later, the coin went down so bad that it was trading at a mere $9. This event sent panic to the crypto world, and those on the BitConnect subreddit went crazy with many claims of massive losses. After a few hours, the subreddit went offline to mark the coin’s death, forever erasing its existence on the network.
But many believed this undoing was because of the base principle for BitConnect, which was seemingly a Ponzi scheme where people tried to make quick gains. So, is this the same fate for Terra’s $LUNA, although the working principle is to help save people from hidden fees on international payments. Therefore, it is not a Ponzi scheme.
However, the past few days have been crazy, with $LUNA losing over 98% of its value in less than 24 hours, and with the current market price, the coin is trading at less than $1. So, why has this token fallen so far down? Would this be the end of $LUNA? Keep reading to find out what we think.
Terra and $LUNA – The Project to Change the World
Terra and $LUNA – The Project to Change the WorldTerra was designed to be worth the same as the US dollar in actual money, while $LUNA is your typical crypto. As a result, 1 Terra will get you $1 of LUNA and vice versa. Therefore, if Terra trades more than a dollar, traders can buy $1 of LUNA and exchange it for one Terra, which is now worth more than a dollar, offering profit.
Also, if Terra trades for less than one dollar, people can buy one Terra and exchange it for $1 worth of LUNA, equaling profit. As a result, when one crashes, investors can easily exchange it for the other for more profit while restoring the price of the falling asset. Therefore, it has an automated mechanism that would last for years.
The Rise of Terra and $LUNA
The coin continues to rise with this principle, and after many weeks, we saw it go up in value. It continues to rise with many investors pulling because of the promises, and since the dollar peg offers a much safer transaction mechanism, it is an attractive investment. Whenever there is a fall, the assets could easily regulate themselves.
We saw the value go as high as $120, and as a result, many investors that bought into the idea made millions, giving more people a good reason to enter the fray. One of the reasons for this fast growth was the automated mechanism because what could go wrong with a crypto asset that self-regulates?
Why Did it Crash?
For a start, the entire crypto world is in a rut, and every coin on the market is experiencing a major downturn. Even the biggest coins on the market are also experiencing this downturn, with Bitcoin trading at around 50% of its all-time high. Therefore, it is normal for Terra and LUNA to experience a downturn.
However, the fall of the coin is also a problem with Terra’s dollar-pegged stablecoin, UST. The crash has seen it fall below the value of $1, and with LUNA also crashing, the self-regulating mechanism isn’t working. As a result, many investors lost their money in the crash. As it stands, no $LUNA investor is safe.
Will It Die Out or Bounce Back?
Unlike BitConnect, Terra and LUNA are not Ponzi scheme-based projects, and they offer real-life solutions. Therefore, there is hope, and the creators are working tirelessly to ensure that the coin gets its life back. The UST steward, LUNA Foundation Guard, is currently looking to fund more than $1 billion to restore the stablecoin.
In addition to that, Do Kwon, one of the project’s creators, tweeted that there is a recovery plan in progress. So, we might see $UST and $LUNA come back to their glory days, but for now, it is looking like it is flat-lining as the value gets closer to $0.
Our Thoughts
Terra has the right principle, and it was working fine before the huge crash. If we can survive this major downturn, there is certainly a chance that it will get only better and more stable.
A turn in the fate of $UST will see $LUNA make its way back to its original value. But since we can’t tell if the recovery plan will work, it is better to hold off on any investments now.
