Luna Repays Users Starting with The Smallest

the brutal truth about bitcoin

Luna Repays Users Starting with The Smallest

The Luna Foundation Guard (LFG), the non-profit in charge of the Terra ecosystem, stated that it sold nearly all of the $3.5 billion in bitcoin it had on hand “as a last-ditch effort to defend the [UST] peg.” By May 7, one day before the spectacular collapse of the UST algorithmic stablecoin and Terra’s LUNA token, the Foundation had acquired 80,394 bitcoin in reserve, or around $3.5 billion. The reserve, however, came crumbling down when UST, the Terra-native stablecoin designed to maintain a 1:1 peg with the US dollar, fell below $0.07. LUNA plummeted from $80 to $0 in three days, prompting some analysts to suspect a coordinated attack on the blockchain.

LFG stated that it would use the remaining assets to repay users who lost money due to UST’s demise. It is worth noting that most miniature holders would be paid first. Since Luna’s death, the Foundation has been under pressure to make the disclosure. Many individuals on Twitter questioned Do Kwon, Terra’s CEO, and his team’s handling of the reserve fund following the Terra ecosystem collapse.

According to CoinGecko, UST was down 58 percent in the past 24 hours at $0.065 at writing. LUNA dropped 39% to $0.0001.

Revive Luna After Historic Crypto Crash

May was a difficult month for all cryptocurrencies, particularly for the moon. Bitcoin and ether have dropped by 25% and 30%, respectively; hence, the luna token has plummeted from $81 a month ago to a fraction of a penny. Terralabs, the creators behind the Terra blockchain, UST, and Luna, have devised a way to avert the collapse.

The de-pegging of TerraUSD (UST), a stablecoin meant to maintain a $1 value at all times, triggered the token’s decline. Instead, it’s an “algorithmic stablecoin” that relies heavily on luna, the Terra blockchain’s native cryptocurrency, to keep its value stable.

Even if the value of one UST fell below $1, it could always trade for one luna. The idea was that if UST devalues 99 cents, arbitrage traders would acquire massive amounts of UST and exchange it for luna.

The system failed when $2 billion in UST was taken all at once, with hundreds of millions of dollars traded. The method for converting UST for luna couldn’t keep up as UST depreciated to 98 cents.

UST is currently selling at 13 cents, while luna is trading for around a fifty-fifth of a penny. The crash wiped out almost $15 billion in cryptocurrency.

Luna owners must approve the plan in a vote slated for Wednesday. If passed, the fork would take place on May 27.

Future of Luna

The production of a billion luna would be a fresh start for the cryptocurrency, which is now experiencing hyperinflation. Over 6.5 billion luna tokens are in circulation, up from 343 million the week before luna’s crash. The link between luna and UST causes inflation: owners swapped billions of UST for luna so that it could be sold for ether or put into a stablecoin that is stable, causing billions of new luna minted in the process.

The bitcoin market is currently in disarray. Bitcoin and ether are at their lowest levels since 2020, while altcoins such as dogecoin and Cardano are faring considerably worse. While it is upsetting for crypto investors, this drop is not uncommon. Cryptocurrencies are notorious for their volatility, and volatile economic conditions are pulling down crypto and the stock market.

The post Luna Repays Users Starting with The Smallest appeared first on FinanceBrokerage.


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