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 traded 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’coin’sh, forever erasing its existence on the network.
But many believed this undoing was because of the base principle for BitConnect, seemingly a Ponzi scheme where people tried to make quick gains. Therefore, it is not a Ponzi scheme. So, is this the same fate for Terra’s $LUNA, Terra’sh’s working principle is to help save people from hidden fees on international payments?
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? Please keep reading to find out what we think.
Terra and $LUNA – The Project to Change the World
Terra was designed to be worth the same as the US dollar in actual money, while $LUNA is your typical crypto. 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. As a result, 1 Terra will get you $1 of LUNA and vice versa.
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 trade 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 increase in value. It continues to grow 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 can 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 significant downturn. Even the most giant 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 TTerra’sdollar-pegged stablecoin, UST. The crash has seen it fall below the value of $1, and with LUNA also crashing, the automated mechanism wasn’t. 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 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 looking to fund more than $1 billion to restore the stablecoin.
In addition, Do Kwon, one of the project’s creators, tweeted thaproject’ss a recovery plan in progress. So, we might see $UST and $LUNA return to their glory days, but for now, it looks like it is flat-lining as the value gets closer to $0.
Terra has the correct principle, and it was working fine before the massive crash. If we can survive this significant 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 pcan’till work, it is better to hold off on any investments now.