Terra has nearly fallen out of crypto’s top 20 coins after its price collapsed 63% on the day.
Terra (LUNA)’s price collapse from Monday continues, now tracing down beneath $16 per coin. Meanwhile, the network’s dollar-pegged stablecoin TerraUSD (UST) continues trading at just $0.8, far below its intended $1.00 value peg.
- LUNA trades at just $15.84 at the time of writing, down 63.13% in the past 24 hours, and 80.74% over the week.
- The cryptocurrency doubly serves as a governance token for the Terra blockchain, and the reserve asset made to preserve the stability of its various stablecoins.
- The most popular stablecoin – TerraUSD – began drifting off of its dollar peg on Sunday, as noted by the Luna Foundation Guard (LFG). To fix the problem, the organization tried deploying some of its Bitcoin reserves on the market to prop up UST’s price.
- However, these reserves have failed to save the stablecoin, and its value has deviated as low as $0.69.
- To make matters worse, its crushed value has created a massive arbitrage opportunity within the Terra ecosystem. As every UST is always convertible for about one dollar of LUNA, traders are incentivized to trade their stablecoins in, only to dump their LUNA on the market shortly after for a profit.
- This has likely contributed to the death spiral of LUNA’s price, which has fallen substantially even next to other bleeding cryptos. By comparison, Bitcoin and Ethereum are down by just 18% and 17% this week respectively.
- Amid the chaos, Binance was forced to halt UST withdrawals from exchanges, citing “network slowness and congestion”.
- Janet Yellen – Treasury Secretary of the United States – even made mention of TerraUSD’s de-pegging during a senate hearing today. She believes it illustrates how stablecoins pose “risks to financial stability” and “need a [regulatory] framework”.
- Terra is now the 20th largest crypto by market cap, despite being within the top 10 just days ago.
- Terra co-founder Do Kwon stated today that he will soon unveil a plan to recover UST’s peg.