The collapse of Terra’s UST stablecoin and governance token LUNA Coin, emerged as one of the biggest upsets in the crypto market last week.
Findings by Investors King showed that LUNA plunged to $0.00002 according to data from cryptocurrency data aggregator, CoinGecko.
At press time, Terra LUNA Coin was ranked 211 on Coinmarketcap, trading at $0.0002353 with a 23.84% drop in the last day and a 100% decline in seven days.
Terra is an open-source blockchain protocol that creates stablecoins designed to consistently track the price of a fiat currency.
TerraUSD (UST) and LUNA Coin are both native tokens of the Terra network, a blockchain-based project developed by Terra Labs.
Terra’s native token, LUNA, is used to stabilise the price of the protocol’s stablecoins. LUNA holders are also able to submit and vote on governance proposals, giving it the functionality of a governance token.
The asset which was ranked among the 10 most valuable cryptocurrencies, has now collapsed by more than 99%, resulting in huge losses for investors.
The Luna crash was attributed to its link to terraUSD (UST), a stablecoin that was pegged at 1 US dollar. UST has recently dropped from its value of $1. Since both UST and LUNA are interlinked, the massive drop in UST value has resulted in LUNA’s overall drop.
The protocol behind the Luna cryptocurrency announced via Twitter on May 13 that it had temporarily halted its blockchain to stop transactions after the token’s price plummeted.
In a separate Tweet, the platform disclosed that the Terra blockchain had resumed block production. The company also stated that it will investigate and publish the findings of the crash.
‘’A post-mortem on everything that transpired the past week is in progress. It will be published asap. These are tremendously difficult times for everyone affected. The feelings are still raw. Please be safe. The strength of the #LUNAtics has been amazing. More to come,’’ the company tweeted.
Meanwhile, Changpeng Zhao, the CEO of crypto exchange Binance has advised against hard forking the Terra blockchain as a means to revive the Terra (LUNA) and TerraUSD (UST) ecosystems.
The crypto investor in a Tweet suggested that the Terra community should first burn the extra minted LUNA, and recover the UST peg to revive the token’s market value.
‘’I am very disappointed with how this UST/LUNA incident was handled (or not handled) by the Terra team. We requested their team to restore the network, burn the extra minted LUNA, and recover the UST peg. So far, we have not gotten any positive response, or much response at all,’’ he said.
On his part, Ethereum co-founder Vitalik Buterin backed a tweet proposing that Terra prioritise smaller investors who lost funds due to the crash.
‘’Strongly support this. Coordinated sympathy and relief for the average UST smallholder who got told something dumb about “20% interest rates on the US dollar” by an influencer, personal responsibility, and SFYL for the wealthy,’ Buterin stated.