Bitcoin broke the $ 26,000 mark, the Luna coin became worthless
Luna, which is a digital currency connected to TerraUSD, has plummeted from $85 a week ago to nearly $0. Not only Luna, Bitcoin also broke the $ 26,000 mark for the first time in 16 months before the selling pressure caused the entire market to evaporate more than $ 200 billion in capitalization in just one session.
Similarly, other cryptocurrencies like Ether also fell deeply to $ 1,704, breaking the $ 2,000 mark for the first time since June 2021.
In addition to worries about the economy when inflation is high, experts say that the collapse of the Luna project played a major role in scaring investors.
TerraUSD, aka UST, is a stablecoin linked to Luna. Unlike stablecoins pegged to fiat or stable assets like gold, UST coin uses an algorithm linked to Luna to adjust the exchange rate to keep it at the nominal standard of 1 USD. But in the past 1 week, this coin has fallen below 1 USD, at 41 cents in session 12/5, despite the efforts to save from founder Do Kwon.
The Luna Foundation Guard side of founder Do Kwon said that they hold $3.5 billion worth of Bitcoins as a backup fund for the Luna digital currency project, but with Bitcoin’s decline, this reserve is not kept. The price is for the project.
In the session of May 12, investors sold off Luna, causing this coin to drop to only 4 cents.
One of the largest cryptocurrency exchanges in the world, Binance, also had to admit that the Luna project was being sold off when there was a large amount of pending orders to withdraw money from this digital currency. As a result, Binance had to suspend the withdrawal from Luna for several hours due to congestion before resuming.
The fact that the founders of Luna has a large reserve of Bitcoin as a backup fund for this project has caused many investors to fear that Bitcoin will be sold in large quantities to keep the exchange rate for the UST. As a result, Bitcoin has depreciated by more than 29% in the past 7 days.
Even Tether, the world’s largest stablecoin pegged to the USD, dropped from the rate of 1 USD to 95 cents in the session of May 12 due to the market sell-off. According to CNBC, many economists fear that Tether will not have enough spare USD to keep the exchange rate for this currency if the sell-off continues like it is now.
*Source: CNBC
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