- Fear among Korean crypto investors has reached a fever pitch after Terra’s flagship stablecoin UST began dropping its intended $1 peg on Monday, in what many see as a “preface” to the currently underway breakdown of its sister token Luna.
- On Wednesday, Upbit, South Korea’s largest cryptocurrency exchange, listed Terra’s governance token as a cautionary item.
- As of 3:20 p.m. on Wednesday, LUNA was trading for around 12,000 won ($9.40) on Upbit, the country’s largest cryptocurrency exchange. This represents a roughly 50% decrease from the previous day. LUNA had a market value of more than 100,000 won until last week.
- Following Luna’s precipitous drop, crypto exchanges both domestically and overseas issued a number of warnings.
Terra (LUNA) has gotten a lot of attention this year for being one of the strongest cryptocurrencies in the world, with its market value climbing to the seventh highest in March. Following the current decline in the cryptocurrency, some of South Korea’s main exchanges have issued warnings regarding trading LUNA.
Terra’s governance token was marked as a warning item by Upbit, South Korea’s largest cryptocurrency exchange, on Wednesday (May 11, 2022).
The decision was allegedly made due to the token’s connection to Terra’s algorithmic stablecoin UST, as well as the continued price decline in both systems.
The official release reads, “Upbit has been monitoring the price fluctuations of Luna and UST and the operation of the algorithm. In a situation where the above issues are not resolved, there is a possibility that unexpected damage may be caused to investors due to sudden fluctuations in the circulation and market price of Luna.”
Due to the increased number of transactions on the blockchain network, the exchange recognises that it may be “difficult” to offer smooth deposit and withdrawal services.
Due to abrupt variations in LUNA’s circulation and network deposit/withdrawal paralysis, members should be mindful of large market price fluctuations.
Bithumb, Coinone, and Korbit, three of South Korea’s crypto “big four,” issued similar cautions to investors. LUNA deposits have been temporarily stopped by Bithumb and Coinone awaiting a comprehensive assessment.Korbit, Korea’s another renowned exchange, cautioned consumers on Tuesday to research LUNA carefully before investing in it as a cryptocurrency. The decision was made after the price fell by more than 50% in a single day. Korbit will assess LUNA for another 72 hours before deciding whether to lift the trade stop. Users can still trade LUNA on the exchange at the moment.
Normal LUNA transactions such as deposits and withdrawals are backed even after the case was labelled as a cautionary item to encourage members to pay attention to their investment decisions in response to a shift in the special circumstances of the project, such as the instability of the LUNA currency volume control algorithm. However, if there is a substantial change in the market situation, a notice of changes in transaction support such as deposits and withdrawals may be added in the future by constantly and consistently reviewing the LUNA circulation volume fluctuations as per project progress, such as the progress of the UST interlocking stabilisation work.
Nothing of this magnitude and severity has ever occurred in crypto space before.
In the last six months, the crypto space has already lost more than half of its market cap.
The global domestic stock market fell by less than 45 percent during the 2008 crash.
LUNA dropped by more than 50% during the trading session as markets reacted to stablecoin UST losing parity with the US dollar. After reaching a high of $57.44 to begin the week, LUNA/USD fell to a low of $24.14 earlier in the day.
This is the largest one-day price drop since LUNA’s inception, and it has pushed the price to its lowest point since last September. The move came after five consecutive sessions of declines, the most recent of which pushed the price below the $50.00 support level.
LUNA’s price has dropped by more than 86 percent in the last 24 hours and by 96 percent from its all-time high of $119 in April.
As a result of the LUNA blunder, the largest day of net bitcoin inflows on exchanges in 4.5 years, with 53.2k BTC in net deposits.
Despite Terra and CEO Do Kwon’s efforts to stabilise UST prices and restore the coin’s peg by deploying the LFG’s massive Bitcoin reserves, the stablecoin continues to fall.
UST fell to new lows after initially recovering to the $0.90 region.
According to @Mudit Gupta, a Blockchain Security Researcher and Ethereum & Substrate Dev, this situation appears to be very similar to the Lehman Brothers situation in 2008, which caused a financial crisis.
(Due to the ongoing subprime mortgage crisis, Lehman suffered an unprecedented loss in 2008. Lehman suffered a loss as a result of holding large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages)
He claims that even the DAO hack feels insignificant in comparison to the Terra crash.
“This will have long-term ramifications. It’s bad for the whole space.”
However, the user does not believe anything will happen to USDT, but it is certainly frightening to see this:
He assures that it is not implied that this is the end of crypto. On the contrary. A bear cycle will clear out the bad projects, allowing true builders to work in peace. Real builders will soon take this space to new heights.