Luna, the sister cryptocurrency of controversial stablecoin TerraUSD, has nearly dropped to $0. The cryptocurrency markets have seen a steep sell-off over the past week after the TerraUSD stablecoin misplaced its $1 peg.
Dan Kitwood | Getty Pictures Information | Getty Pictures
Luna, the sister cryptocurrency of controversial stablecoin TerraUSD, has collapsed to almost $0.
TerraUSD, or UST, has been dragged into the highlight in the previous few days after the so-called stablecoin, which is meant to be pegged one-to-one with the U.S. greenback, fell sharply beneath the $1 mark.
UST is an algorithmic stablecoin which makes use of code to take care of its value at round $1 primarily based on a posh system of minting and burning. A UST token is created by destroying a few of the associated cryptocurrency luna to take care of the greenback peg.
In contrast to rival stablecoins Tether and USD Coin, UST is just not backed by any real-world belongings similar to bonds. As an alternative, the Luna Basis Guard, a nonprofit created by Terra’s founder Do Kwon, is holding about $3.5 billion of bitcoin in reserve.
However in occasions of market volatility, similar to this week, UST is being examined.
Its peg has been misplaced and now buyers are dashing to dump the related luna token. Luna’s value has plunged from round $85 every week in the past to commerce at round 3 cents on Thursday, in line with information from CoinGecko, making the cryptocurrency nearly nugatory.
On Thursday, Binance, one of many world’s largest cryptocurrency exchanges, mentioned that the Terra community, the blockchain related to the luna token, is “experiencing slowness and congestion.” Binance mentioned that consequently, there’s a “excessive quantity of pending Terra community withdrawal transactions” on its change, in an indication that buyers are dashing to promote luna.
Binance needed to droop withdrawals of luna for a number of hours on Thursday due to the congestion, earlier than resuming them.
The TerraUSD controversy has sparked contagion within the broader cryptocurrency market. That is as a result of the Luna Basis Guard is holding bitcoin as a kind of reserve. The concern is now that the group my must dump its bitcoin holdings to attempt to assist the peg.
Bitcoin has plunged greater than 29% within the final seven days and on Thursday dropped beneath $26,000 to commerce at its lowest stage since late Dec. 2020.
Tether, the world’s largest stablecoin, additionally fell beneath its $1 peg on Thursday amid a broader panic in cryptocurrency markets.
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