Luna, the sister cryptocurrency of controversial stablecoin TerraUSD, has virtually dropped to $0. The cryptocurrency markets have seen a steep sell-off during the last week after the TerraUSD stablecoin misplaced its $1 peg.
Dan Kitwood | Getty Images News | Getty Images
Luna, the sister cryptocurrency of controversial stablecoin TerraUSD, has collapsed to almost $0.
TerraUSD, or UST, has been dragged into the highlight in the previous couple of days after the so-called stablecoin, which is meant to be pegged one-to-one with the U.S. greenback, fell sharply under the $1 mark.
UST is an algorithmic stablecoin which makes use of code to keep up its value at round $1 primarily based on a fancy system of minting and burning. A UST token is created by destroying among the associated cryptocurrency luna to keep up the greenback peg.
Unlike rival stablecoins Tether and USD Coin, UST just isn’t backed by any real-world belongings akin to bonds. Instead, the Luna Foundation Guard, a nonprofit created by Terra’s founder Do Kwon, is holding about $3.5 billion of bitcoin in reserve.
But in instances of market volatility, akin to this week, UST is being examined.
Its peg has been misplaced and now buyers are dashing to dump the related luna token. Luna’s value has plunged from round $85 per week in the past to commerce at round 3 cents on Thursday, in accordance with knowledge from CoinGecko, making the cryptocurrency virtually nugatory.
On Thursday, Binance, one of many world’s largest cryptocurrency exchanges, stated that the Terra community, the blockchain related to the luna token, is “experiencing slowness and congestion.” Binance stated that consequently, there’s a “high volume of pending Terra network withdrawal transactions” on its change, in an indication that buyers are dashing to promote luna.
Binance needed to droop withdrawals of luna for just a few hours on Thursday due to the congestion, earlier than resuming them.
The TerraUSD controversy has sparked contagion within the broader cryptocurrency market. That’s as a result of the Luna Foundation Guard is holding bitcoin as a form of reserve. The worry is now that the group my should dump its bitcoin holdings to attempt to assist the peg.
Bitcoin has plunged greater than 29% within the final seven days and on Thursday dropped under $26,000 to commerce at its lowest degree since late Dec. 2020.
Tether, the world’s largest stablecoin, additionally fell under its $1 peg on Thursday amid a broader panic in cryptocurrency markets.