Friday, September 30, 2022

LUNA Dips Over 95% Sending Holders Into Panic Mode, Any Chance For Recovery?

All is clearly not well within the Terra ecosystem as LUNA price continues to head for the rocks. Per CoinMarketCap, the last 24 hours alone has seen LUNA falling by over 95%, to trade at $1.07 at press time. This has sent holders of the token into an unimaginable panic attack, as they look to quickly sell off their LUNA holdings.

Furthermore, the TerraUSD (UST) also continues to lose its dollar peg and currently stands at $0.70. Moreso, the Terra blockchain itself has also seen its total value locked (TVL), plunging by a whopping 71%. And this all happened, just within the past 24 hours.

What’s Really Behind The Continuous Fall of LUNA?

There has been multiple speculations as to why LUNA and the UST are experiencing a seemingly irredeemable plunge. However, the one that has stuck most, is exploitation that reportedly happened on the Terra blockchain.

Without a doubt, the UST was well on its way to become DeFi’s top stablecoin. In fact, to further strengthen the UST’s position, the founder of Terra, Do Kwon, may have set out a simple plan with $FRAX creator.

But according to an inside source, the simple plan was to move UST in the UST-3pool to 4pool on Curve — a stablecoin liquidity pool (LP). Interestingly, the move happened some few days ago, and just as expected, it brought about UST’s depeg. However, that was just about normal. Originally, the concept of UST-LUNA is to burn LUNA in order to mint UST and vice versa.

But then, an attack supposedly happened. An unidentified hacker burned a very large amount (approximately 500,000,000) of LUNA at once. However, this was done in order to be able to mint the same value of UST. And, immediately after minting, the attacker dumped it, leading to a further depeg. The following day, the same account repeated the same steps again. And immediately, there came a widespread panic, forcing people into a sell-off mode.

Meanwhile, with more LUNA tokens being minted into the ecosystem, a situation of excess supply over demand is also arising. Therefore, it is only expected that LUNA’s price will continue to nosedive. At least, until some corrective measures are put in place.

So far though, LUNA has dipped over 81% on weekly charts, with the worst happening over the last 4 days. In fact, Binance had to suspend UST and LUNA withdrawals on Monday as a result of the uncertainties surrounding Terra.

Possible Recovery Plans

From the look of things, Terra’s founder, Do Kwon may already be working on recovery plans for the UST stablecoin though. Some hours ago, he took to his Twitter page to share a thread of how he thinks the situation might be salvaged.

Additionally, there are unconfirmed reports within the crypto community that Terra’s parent company – Luna Foundation Guard, is actively seeking help from crypto investors in order to raise a $1 billion protection fund.

Hopefully, Do Kwon and the ranks within the Terra ecosystem will be able to save the situation.

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