The rate of the Luna cryptocurrency, which a few days ago was among the top ten in terms of market capitalization, collapsed to almost zero. Last week, the Luna token was worth around $85. A few days ago, the situation changed dramatically, and at the time of this writing, the cryptocurrency is trading at $0.005 per unit.
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Recall that Luna is part of the Terra project, the ecosystem of which should serve as a bridge between cryptocurrencies and traditional finance. To implement the plan, stablecoins were included in the ecosystem, which are digital coins pegged to the rate of some real national currency.
Terra USD or UST is an algorithmic stablecoin, the parity of which against the dollar is ensured by a certain algorithm: when the coin price falls below $1, additional Luna tokens are issued, for which stablecoins are automatically exchanged until the price of Terra rises to $1. UST is not backed by any real assets such as bonds. Instead, the non-profit organization Luna Foundation Guard, led by Terra founder Do Kwon, holds about $3.5 billion worth of bitcoin in reserve.
The problems began on May 10, when one of the investors put up about $300 million worth of UST tokens for sale, which caused a panic in the market. As a result, the rate of Luna and UST collapsed. Following UST, the rate of a number of other cryptocurrencies fell, including the world’s largest stablecoin Tether, the value of which went down below $1 ($0.99 per coin at the time of writing). Bitcoin exchange rate went down below $27 thousand per unit, but later the most popular cryptocurrency in the world managed to partially recover. At the moment, for one bitcoin they give about $30,300.
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