The period between May 5 and May 11 has turned into the darkest week in the history of the cryptocurrency market. UST, the Terra blockchain stablecoin, lost its position and crashed and took down the total crypto market into an uncontrollable tailspin.
Billions of dollars were wiped from the market in digital assets in 24 hours even as LUNA, the Terra governance coin lost 99% of its value, crashing from $24.14 to a rock-bottom $0.1538 in the same period.
Both TerraUSD (UST) and LUNA are the creation of Terraform Labs and are also guided by it. DO Kwon is the CEO and co-founder of Terraform Labs.
Though TerraUSD (UST), a decentralized stablecoin is pegged 1:1 with the USD, it isn’t backed by it or other commodities or fiat currency. Instead, UST depends on an algorithm called smart-contract that comprises LUNA that keeps the UST stable.
LUNA’s Predicament Has Forced Investors About Its Future
The algorithm helps keep track of the TerraUSD demand and adjusts supply accordingly, keeping the value at around $1. Do Kwon backed the algorithmic stablecoins through Bitcoin and were accordingly accumulating Bitcoin and [Ma1] took in over $3.5B worth of the dominant crypto.
But the situation changed drastically on May 8 as UST crashed and lost 70% of its value and dropped to an all-time price of $0.029.
The meltdown involving Terra (LUNA) has forced investors in cryptocurrency to question whether it will be possible for both Terra (LUNA) AND TerraUSD (UST) to even reach $1.
But Do Kwon has remained defiant, though many in the crypto-industry have begun to detach themselves from this protocol that they believed was conveying real-time utility for Bitcoin and stablecoins.
Celsius Network, the cryptocurrency-focused platform for wealth management, has received negative publicity because of the wipeout of LUNA. But the company informed that they were not significantly exposed to the swings in the market