MygoalMySip

  • Mutual Funds
    • Mutual Funds
    • Equity Fund
    • Debt Fund
    • Hybrid Fund
  • Stocks
    • Stocks
    • Large Cap
    • Mid Cap
    • Small Cap
  • Personal Finance
    • Personal Finance
    • Savings
    • Tax
Menu
  • Mutual Funds
    • Mutual Funds
    • Equity Fund
    • Debt Fund
    • Hybrid Fund
  • Stocks
    • Stocks
    • Large Cap
    • Mid Cap
    • Small Cap
  • Personal Finance
    • Personal Finance
    • Savings
    • Tax
My-Goal-My-Sip-Final-Logo
Search
Close
My-Goal-My-Sip-Final-Logo
  • Mutual Funds
    • Mutual Funds
    • Equity Fund
    • Debt Fund
    • Hybrid Fund
  • Stocks
    • Stocks
    • Large Cap
    • Mid Cap
    • Small Cap
  • Personal Finance
    • Personal Finance
    • Savings
    • Tax
Login or Sing up

The Luna debacle: The 4th Largest Crypto to Zero.

September 13, 2022
in Personal Finance, Stocks
luna

Terra Luna wiped out nearly $18 billion. To understand this sharp fall, we must first understand the idea of the stablecoin. Some of you who invest in cryptocurrency might be well aware of it. For starters, stablecoins are those whose value is pegged to a fiat currency, another cryptocurrency, a commodity, or a financial instrument. 

By value, I mean the price of a coin; for example, XYZ stablecoin, whose price is pegged to the US dollar at a 1:1 ratio, meaning that if you liquidate one unit of XYZ coin, you will receive one dollar in return. There are other types of stablecoins too, such as those backed by gold, another cryptocurrency, and non-collateralized stablecoins, which are governed by algorithms.

The protagonist of our story, Luna, is the sister of UST, the 4th kind of stablecoin. Terra is a blockchain-powered by Terraform Labs, which produces Luna as its native currency. Luna is pegged to UST, which is an algorithmic or decentralized stablecoin.

How do the UST and Luna pegs work?

To create UST, you need to burn Luna. Before the great fall, Luna was trading at $85, which means you would get 85 UST for 1 Luna. But, in the process, Luna needs to be destroyed (burned). If more people buy into UST, more Luna would be burned, ensuring the remaining Luna supply is more valuable.

UST would always be exchanged for $1 worth of Luna. Now, if the price of UST falls, traders will be interested to buy UST and exchange it for Luna; in this process, UST will be burned, thus controlling the supply and pushing back the price.

Where did things go wrong?

One of the earliest signs that things were going wrong for the stablecoin came when UST deposits on Anchor started dropping in the first week of May 2022.

Anchor offers market-leading yields of up to 20% a year to users who deposit their UST on the platform. Before UST started its decline late on Saturday, Anchor was home to 75% of UST’s entire circulating supply. That’s $14 billion of UST out of a total circulating supply of $18 billion.

With so much UST locked up in Anchor, it became clear that most investors were buying the stable coin with the sole intent of reaping those sweet, sweet Anchor yields.

Things got messed up when $285 million worth of UST was liquidated on Curve and Binance, which means a lot of UST was dumped, which pulled down the price of UST, pushing up the supply of Luna. When huge LUNA tokens flooded into the space, the demand eased out. Therefore, the price was negatively impacted heavily. The number of Luna tokens in circulation went up from 343 million to more than 6.5 trillion in just a week.

Will Luna be able to recover?

The current LUNA price is $0. 0.000060. It may be impossible unless a large part of the hyper-inflated circulating supply of LUNA (now 6.5 trillion LUNA coins) is burnt. Furthermore, a new chain called Luna V2 has been launched, and the earlier coin has been named Terra Classic.

Crypto investors should apply extreme caution while investing.

Writer: Suraj Kar 

To learn more, get our Journal: PW Insider for FREE!

Read Next: Gautam Adani: Richest Asian Billionaire in History?

For more information, reach us at [email protected]

Team, MyGoalMySip.

ShareTweetPin

Related Posts

𝐒𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐥𝐞 𝐚𝐧𝐝 𝐄𝐒𝐆 𝐈𝐧𝐯𝐞𝐬𝐭𝐢𝐧𝐠: 𝐌𝐚𝐤𝐢𝐧𝐠 𝐚𝐧 𝐈𝐦𝐩𝐚𝐜𝐭 𝐰𝐢𝐭𝐡 𝐘𝐨𝐮𝐫 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬
Personal Finance

𝐒𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐥𝐞 𝐚𝐧𝐝 𝐄𝐒𝐆 𝐈𝐧𝐯𝐞𝐬𝐭𝐢𝐧𝐠: 𝐌𝐚𝐤𝐢𝐧𝐠 𝐚𝐧 𝐈𝐦𝐩𝐚𝐜𝐭 𝐰𝐢𝐭𝐡 𝐘𝐨𝐮𝐫 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭𝐬

Introduction In recent years, a growing number of investors have started to embrace sustainable and ESG (Environmental, Social, and Governance)...

May 31, 2023
𝐄𝐱𝐩𝐥𝐨𝐫𝐢𝐧𝐠 𝐭𝐡𝐞 𝐖𝐨𝐫𝐥𝐝 𝐨𝐟 𝐄𝐓𝐅𝐬: 𝐀 𝐂𝐨𝐦𝐩𝐫𝐞𝐡𝐞𝐧𝐬𝐢𝐯𝐞 𝐆𝐮𝐢𝐝𝐞
Personal Finance

𝐄𝐱𝐩𝐥𝐨𝐫𝐢𝐧𝐠 𝐭𝐡𝐞 𝐖𝐨𝐫𝐥𝐝 𝐨𝐟 𝐄𝐓𝐅𝐬: 𝐀 𝐂𝐨𝐦𝐩𝐫𝐞𝐡𝐞𝐧𝐬𝐢𝐯𝐞 𝐆𝐮𝐢𝐝𝐞

Introduction: In the ever-evolving landscape of investment options, Exchange-Traded Funds (ETFs) have gained significant popularity among investors. Offering a diverse...

May 29, 2023
𝐔𝐧𝐝𝐞𝐫𝐬𝐭𝐚𝐧𝐝𝐢𝐧𝐠 𝐁𝐮𝐲 𝐍𝐨𝐰, 𝐏𝐚𝐲 𝐋𝐚𝐭𝐞𝐫 (𝐁𝐍𝐏𝐋): 𝐀 𝐂𝐨𝐧𝐯𝐞𝐧𝐢𝐞𝐧𝐭 𝐚𝐧𝐝 𝐅𝐥𝐞𝐱𝐢𝐛𝐥𝐞 𝐏𝐚𝐲𝐦𝐞𝐧𝐭 𝐎𝐩𝐭𝐢𝐨𝐧
Personal Finance

𝐔𝐧𝐝𝐞𝐫𝐬𝐭𝐚𝐧𝐝𝐢𝐧𝐠 𝐁𝐮𝐲 𝐍𝐨𝐰, 𝐏𝐚𝐲 𝐋𝐚𝐭𝐞𝐫 (𝐁𝐍𝐏𝐋): 𝐀 𝐂𝐨𝐧𝐯𝐞𝐧𝐢𝐞𝐧𝐭 𝐚𝐧𝐝 𝐅𝐥𝐞𝐱𝐢𝐛𝐥𝐞 𝐏𝐚𝐲𝐦𝐞𝐧𝐭 𝐎𝐩𝐭𝐢𝐨𝐧

Introduction: In recent years, a new payment option has gained significant popularity among consumers: Buy Now, Pay Later (BNPL). This...

May 24, 2023
REIT in India in 2023: Unlocking Opportunities in the Real Estate Market
Personal Finance

REIT in India in 2023: Unlocking Opportunities in the Real Estate Market

Real Estate Investment Trusts (REITs) have long been a popular investment option for individuals seeking exposure to the real estate...

May 24, 2023
Next Post
PW Insider: September 2022 Edition

PW Insider: September 2022 Edition

Seven reasons to have a Systematic Investment Plan (SIP).

Seven reasons to have a Systematic Investment Plan (SIP).

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Recommended

acc

ACC Ltd.: Should You Invest?

February 7, 2022
load

What is Load in a Mutual Fund? 

January 21, 2022
FASHION

Vedant Fashion IPO: Should you invest?

February 7, 2022
goal

What is goal-based investing and why is it so important?

January 28, 2022

subscRibe!

Categories

  • Books
    • Monthly Journal
  • Debt Fund
  • Equity Fund
  • Hybrid Fund
  • Large Cap
  • Learn
  • Mid Cap
  • Mutual Funds
  • Personal Finance
  • Savings
  • Small Cap
  • Stocks
  • Tax
  • Uncategorized

Instagram

    The Instagram Access Token is expired, Go to the Customizer > JNews : Social, Like & View > Instagram Feed Setting, to to refresh it.

About Us

MyGoalMySip is an Online Mutual fund investment platform powered by Prudent Wealth. As an investor, it might be hard to find the perfect investment opportunity; therefore, we’re here to help you make an informed decision.

Our goal is to educate people and make them financially literate, and at the same time guide you in your investment journey, in short MyGoalMySip is your investment buddy.

Read More
Facebook Twitter Youtube Linkedin

Quick Links

  • Books
  • Learn
  • Monthly journal
  • Merchandise

    Copyright © 2023 MygoalMySip | All Rights Reserved

    About Us

    MyGoalMySip is an Online Mutual fund investment platform powered by Prudent Wealth. As an investor, it might be hard to find the perfect investment opportunity; therefore, we’re here to help you make an informed decision.

    Our goal is to educate people and make them financially literate, and at the same time guide you in your investment journey, in short MyGoalMySip is your investment buddy.

    Read More
    Facebook Twitter Youtube Linkedin

    Quick Links

    • Books
    • Learn
    • Monthly journal
    • Merchandise

      Copyright © 2023 MygoalMySip | All Rights Reserved