Tuesday, February 7, 2023

LUNA Nosedives Below $16 As TerraUSD Still Remains Unpegged

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LUNA nosedives below $16 while the TerraUSD stablecoin remains unpegged so let’s have a closer look at today’s altcoin news.

Terra’s price drop from Monday continues and traces below $16 per coin so in the meantime, the network’s dollar-pegged terraUSD stablecoin continues to trade at just $0.8 which is below its dollar peg. LUNA nosedives are below $16 and it is down by 61% in the past day and 80.74% in the past week. The crypto serves as a governance token for the Terra blockchain and the reserve asset made to preserve the stability of the stablecoins. The most popular stablecoin TerraUSD started drifting off its dollar peg as noted by the Luna Foundation so to fix this problem, the organization tried to deploy some of the BTC reserves on the market to boost the UST price.

These reserves failed to save the stablecoin and the value dropped to $0.69. to make matters worse, its crushed value created a huge arbitrage opportunity in the Terra ecosystem so every UST is always convertible for about a dollar of LUNA, and traders are incentivized to trade their stablecoins but then dump their LUNA ont the market after for a profit. This contributed to the death spiral of LUNA’s price which fell dramatically and continues to do so in the days after. By comparison, BTC and ETH are down by 18 and 17%. amid the chaos, Binance was forced to halt UST withdrawals from the exchanges due to network congestion and slowness.

luna price
LUNA 24-hour Price Chart (Source: Coingecko)

Janet Yellen on the other hand mentioned Terra’s USD de-pegging during a senate hearing and she thinks that it shows how stablecoins pose risks to financial stability and that’s why they need a regulatory framework. Terra is the 20th biggest crypto by market cap despite being in the top 10 a few days ago. Terra’s co-founder Do Kwon stated that he will unveil a plan to recover UST’s peg.

Terra’s LUNA token continues to take a beating today as LUNA slides by 32% in an hour and 65% in the past 24 hours. The coin is now trading at $17.71 according to the data from Coingecko. LUNA was trading at around $65 a few days ago but then it started collapsing as the dollar stablecoin UST lost its peg. UST dropped to below $0.70 and was struggling to get back on parity with the dollar so after the partial recovery to $0.93 it dropped back to under $0.75.

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