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Tuesday, October 3, 2023

“Korean coin” Luna 93% plunged into panic… Kwon Do Hyun, “We will create a way to overcome the crisis”

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Sister stablecoin UST collapses at $1
Bitcoin “collapsed” by $30,000

Dohyun Kwon, CEO of Terraform Labs.

Korean cryptocurrency Luna and sister stablecoin TerraUSD (UST) are falling day by day. When the price of bitcoin collapsed at $30,000, the entire cryptocurrency market entered a recession phase.

At 10:00 am on the 12th, the moon was worth $1.17, a 93.29% drop from the previous day, according to CoinMarketCap, a cryptocurrency market website. It entered the $1 range from about 9 pm on the 11th, and from 10:30 pm short (sell) forces gathered and recovered to the $5 range for a while, but then re-entered the $1 range about 4 hours later.

UST dropped to $0.3 around 4:30 am on the 11th. At 8:20 am on the 12th, it rose to $0.8, but due to the nature of the stablecoin, it needs to be maintained at $1, so the price has not fully recovered.

The unusual trading algorithm of Luna and Terra is interpreted to have triggered a sell-off in a situation where the cryptocurrency market was frozen due to an increase in interest rates and a crash in the US stock market.

UST is an algorithm-based stablecoin whose value is fixed by buying or selling Luna. When the price of UST falls below the dollar, it issues Luna to buy UST, and when the price of UST rises above the dollar, it buys bitcoin and fixes the value at one dollar.

However, since the price of UST recently fell below $1, even the price of Luna has plummeted, and it is analyzed that this has fallen into a vicious circle that causes the price of the two cryptocurrencies to decline again. Research firm Fundstrat concluded that “the fall in the prices of Luna and Terra is a ‘death whirlwind’ that could completely destroy the credibility of stablecoins.”

Terra coin 7-day chart (LUNA).

Terra coin 7-day chart (LUNA).

Luna is a cryptocurrency developed by Dohyun Kwon, CEO of Terraform Labs, a former Apple engineer. Although Terraform Labs is headquartered in Singapore, interest from domestic investors has been high since the coin was issued by a Korean representative of the company.

Last month, Luna skyrocketed to $119, garnering attention as it rose to 8th place in terms of global cryptocurrency market capitalization. However, last week it fell to 97% and is now at 37th place.

The price of bitcoin fell below $30,000 on the day that the collapse of Luna and UST caused a shock. At one time, the mark of 40 million South Korean won collapsed.

Some foreign media even compared the collapse of Luna/Tera to the 2008 global financial crisis triggered by the Lehman Brothers crisis. According to Bloomberg, “characteristics of shadow finance (financial institutions that are not regulated by reliability), such as extremely high leverage and a bit-cycle mechanism, can be easily found in the Terra ecosystem.”

Meanwhile, when a bank run (a phenomenon in which depositors flock to collect their deposits) occurred due to falling prices, CEO Kwon tweeted, “I understand the past 72 hours have been very difficult for all of you. so that you know that we are determined to be with you and we will create a way to overcome this crisis.”

However, BJ Aiya, global head of cryptocurrency exchange Luno, said, “CEO Kwon’s message does not inspire investor confidence,” according to CNBC.

Reporter Hyeongjun Yoon yoon.hyeongjun

Source: Economist

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