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Luna’s ‘death’ was forewarned

Hacks, scams, roosters, price drops are common incidents in the cryptocurrency market. But the collapse of the Luna token is a different story.

Luna is seen as an important experiment – an attempt to create a stablecoin (stable coin) pegged to USD without relying on stock traditional finance. But the collapse of the Terra project last week casts doubt on this idea.

At the beginning of April, with a price of more than 100 USD, Luna – the token of Terra project – entered the top 10 largest cryptocurrencies in the world. But last week, the value of this coin dropped millions of times, down to 0.0001 USD. According to data from Coinmarketcap, more than 600 billion USD in market capitalization has evaporated from the crypto market after the Luna crash.

This is a shock to many people from billionaire operators, cryptocurrency exchanges with small players because Luna has a clear development roadmap and is invested by large funds, so it has high credibility.

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The collapse of Luna impacted investor confidence in cryptocurrencies. (Photo: ABC News)

In fact, Luna’s collapse was warned many months ago by Kevin Zhou, founder of the hedge fund Galois Capital. At a time when Luna was developing like crazy, Zhou predicted the project would end badly and warned investors to be cautious.

Few people believed Zhou’s warnings at the time and now regret it. Experts say that the Luna disaster is causing the trust in cryptocurrencies of regulators and users to erode.

“This serious breakdown could drain investors’ confidence in the cryptocurrency market in the short-term”Soumyarendra Barik’s writer Indian Express identify.

Barik also noted that the stablecoin’s demise has also prompted regulators and governments to call for stricter enforcement of laws governing crypto projects.

“Cryptocurrencies like stablecoins are growing rapidly and there are risks to financial stability.”said Gary Gensler, Chairman of the US Securities and Exchange Commission (SEC).

According to Business Insider, regulators are “taking advantage of” the current moment to highlight risks to digital assets. Many experts warn of a possible bigger impact on financial markets as many large companies are investing in Bitcoin or other crypto assets.

Luna’s demise also threatens the funding chain that crypto startups rely on. This capital flow depends a lot on whether the investor is willing to accept the risk or not.

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Regulators are “taking advantage” of the current moment to highlight risks to digital assets. (Photo: Forkast)

The story of Luna will certainly not be forgotten for a long time. Small players who used all their investment savings were wiped out, while many lost half a billion dollars and became homeless. Even crypto investors who have no direct contact with Luna are suffering huge losses because of the coin’s demise.

Zhou thinks that at a time when cryptocurrencies are thriving like today, the Luna crash is becoming a wake-up call for many. “Better it happens now than later”this expert said.

Meanwhile, investors are concerned that if the value of a supposedly “stable” digital asset can be wiped out so easily in a matter of days, will other “stable” coins do the same? in a similar situation?

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