Why The Price Of LUNA Fell By 99%

Why The Price Of LUNA Fell By 99 percent

Table of Contents



Terra LUNA, a cryptocurrency, has tumbled, losing 99% of its value. The whole crypto market has been shaken by the Terra LUNA crash.


The value of the LUNA coin plummeted on May 11th, falling from $6 to $1. And on the afternoon of May 12th, it dropped to roughly $0.02.


In this article, we will go over what Terra LUNA is and why it went bankrupt.


What Is Terra LUNA?


Terra is a stablecoin-creating blockchain network created using the Cosmos SDK. Each Terra stablecoin is convertible into LUNA, the network’s native asset, rather than using cash or over-collateralized crypto as reserves.


Holders of the LUNA token can use their tokens to pay network fees, vote in elections, invest in the Tendermint Delegated Proof of Stake consensus process, and peg stablecoins.


The USD value of LUNA is converted to UST tokens at a 1:1 ratio to peg a stablecoin like TerraUSD. If the price of UST is $0.98, arbitrageurs win 2 cents by trading 1 UST for $1 USD. As UST is consumed, this process raises demand while decreasing supply. The stablecoin then returns to its original position.


Savvy investors convert $1 of LUNA into 1 UST and profit 2 cents when UST is above $1, say at $1.02. The supply of UST rises, but demand falls, putting the price back to its previous level.


Validators and delegators stake LUNA for rewards in addition to lowering stablecoin volatility. These two players are critical to the network’s security and transaction confirmation.


Validators and delegators stake LUNA


You may buy LUNA on Binance and then store it, stake it, and participate in governance via Terra Station, the Terra blockchain network’s official wallet and interface.

What Is Terra And What Does It Do?


Terra is a blockchain that allows users to produce fiat-pegged stablecoins. The network’s seigniorage mechanism is largely used by these currencies. Do Kwon and Daniel Shin of Terraform Labs established the network in 2018, and it leverages Tendermint Delegated-Proof-of-Stake (DPoS) as its consensus method. Terra allows you to create a variety of different stablecoin kinds using smart contracts.


The project has a big userbase in South Korea and has proven popular in Asian e-commerce marketplaces. Taxi riders in Mongolia, for example, may pay select drivers with Terra MNT, a stablecoin tied to the Mongolian tugrik. Terra currencies are tokens created on the platform that exists alongside the network’s original LUNA token for governance and usefulness.


Terra and LUNA are in a mutually beneficial partnership.

What Is LUNA?


Terra’s coin, LUNA, serves four functions in the Terra protocol:


  1. A technique for paying transaction fees in the company’s gas system (utility token).


  1. A mechanism to participate in the governance structure of the platform. You may make and vote on proposals to improve the Terra protocol by staking your LUNA coins.


  1. A technique to absorb demand variations and maintain price pegs for stablecoins created on Terra.


  1. A token that may be used to participate in the DPoS consensus mechanism that allows validators to process network transactions.


The maximum intended supply of LUNA tokens is one billion. Terra will burn LUNA until its supply recovers to the equilibrium level if the network surpasses one billion LUNA.


Terra LUNA Crashed By 99% 


The currency is tied to TerraUSD, an algorithmic stablecoin that has been in the news over the past week after losing its dollar peg. LUNA is a form of temperature check for TerraUSD, a sister coin designed to absorb market turbulence and shockwaves during periods of high volatility.


The current collapse in the cryptocurrency market occurs when the market, like other risk assets, falls. On Thursday last week, the overall market capitalization of all cryptocurrencies hit a new 2022 low. Bitcoin was trading as low as $25,000 on Thursday morning but has retraced some losses, climbing back above $30,000.


Terra is a stablecoin that employs an algorithm to keep its dollar peg, as opposed to a coin like Tether, which is backed by fiat currency and other assets. To keep Terra at or above one dollar, the programming erases sections of Luna currency. 


Terra, on the other hand, isn’t backed by marketable assets. Instead, the token is backed by around $3.5 billion in bitcoin reserves. Terra’s crisis has prompted investors to liquidate LUNA, fearing that a key component of the crypto ecosystem is collapsing. LUNA has dropped from a high of $85 to a low of roughly $0.01 within one week.

Why Did LUNA Crash?


The explanation for the fall is simple: LUNA is linked to Terra USDT — the US dollar was tied to the stable coin. The price of UST plummeted after it separated from the dollar earlier last week. 


The crypto industry has been thrown into chaos as a result of this revelation. LUNA’s market value has plummeted from $40 billion to $200 million. LUNA has wrecked away crypto speculators’ wealth. The currency triggered a chain reaction that caused other big currencies to lose 30% of their value. 


Bitcoin, the world’s most valuable cryptocurrency, sank 7% to $28,600, while Ethereum plunged 11% to $2065.

Can LUNA Recover?


After seeing the enormous wipeout of crypto investors, many investors fell asleep and believe Luna will never recover.


Investors in cryptocurrency swiftly sold their holdings. It prompted a crypto algorithm mechanism to crash, which was supposed to bring the LUNA’s price back to normal.


After the harsh storm, some investors hope the company will rebound and return to its previous position. However, it appears that surpassing and achieving the same price is almost difficult.


Mentorship Helps Minimize Losses


Now that you have seen how devastating can crypto trading be sometimes, it is now time to learn how to avoid such losses and take minimal risks while being aware of the potential outcome. 


The solution to this is mentorship. 


Mentorship is a mutually beneficial professional relationship in which a more experienced person (the mentor) conveys knowledge, expertise, and wisdom to a less experienced person (the mentee) while also strengthening their mentoring abilities. 


A good mentor may provide professional guidance while keeping a pleasant and supportive connection with the mentee. A mentor should constantly consider the best interests of their mentee and modify their mentoring style to match those requirements.


These three things should be kept in mind while seeking a mentor:


  • Define your goals for your career and the skills you’ll need to get there.
  • Approach a mentor relationship as if it were a professional buddy — be relaxed and cordial.
  • Begin by building your own professional network. We frequently have mentors who can help us in a variety of ways, and all it takes is a little effort on our part to turn that connection into a long-term relationship.


Role Of A Mentor


Whether you’re the owner of a brand-new company or an experienced entrepreneur, you can always benefit from a mentor.


Diane Domeyer Kock, executive director of hiring agency The Creative Group, said Business News Daily, “A mentor may act as a sounding board at important stages during your career.” “They may give career management advice you won’t receive anywhere else, as well as an insider’s view on the field and introductions to crucial industry connections.”


Mentors may assist their mentees to recognize and prevent business errors, as well as work through the problems ahead of them, according to Doa Storey, an OPEN Mentorship Institute mentor and American Express OPEN expert on procurement.


Another crucial issue raised by Vicki Salemi, a career adviser for renowned job search portal Monster, is that it’s easy to lose sight of the broader picture while we’re engrossed in our own jobs. Having mentors is crucial, especially early in your career. These should not be your bosses, and they should provide advice on how to advance as well as support your general objectives.


Where To Find A Mentor?


The first step in choosing a mentor is to determine your professional goals. It’s vital to leave room to go where circumstances lead you, so this doesn’t imply planning out your entire career, but outlining what you want in the near term will help you get started. Consider your career path and narrow it down to see who has your ideal job and whoever you like, said Bill Driscoll, Robert Half’s senior district president of technical staffing services in the Northeast and Midwest.


Here at Trader J, we offer 1 to 1 and group mentoring depending on your needs. Whether you are new to trading or an experienced trader, there is something for everyone to learn here. Our strategies are directed toward finding ways to boost your success rate.

Here at Trader J we offer 1 to 1 and group mentoring depending

With over 6 years of experience in this field, we offer a free consultation.

So book now and get up to a 20% discount on group sessions.

0 0 vote
Article Rating

Trader J Recent Posts

Looking to get into trading?

Email us now and get instant reply.