The currency circle has been bloody in the past two days, and the market sentiment has also fallen into extreme panic. Whether you are an investing novice or an investing veteran, you have once again felt the cruelty of the currency circle. The collapse of LUNA currency brought down the entire virtual currency market. Luna and UST collapsed quickly after encountering attacks from financial giants. The collapse of LUNA currency not only caused the sudden death of Terra, a large public chain ecosystem, but also had a negative impact on the entire public chain ecosystem. The crypto market has had a very negative impact, and many currencies have started plummeting mode. The latest price of LUNA coin is $0.0000915≈￥0.000703
Can LUNA coin be saved? LUNA coins are extremely difficult to save. Although virtual currency has always claimed to be "digital gold", it often uses the banner of "anti-inflation" and "replacement of credit currency". But in fact, virtual currencies have always been greatly affected by the Fed's interest rate hike and water release cycle. In March 2020, global stock markets collapsed, and virtual currencies also collapsed, showing no hedging effect. And as long as the Federal Reserve releases water, virtual currencies will be like chicken blood and continue to bubble like crazy. Although some leading virtual currencies, such as Bitcoin, have some consensus values, there are also some transaction values based on gray areas to support their basic value. But it is obvious that the crazy speculation of virtual currencies in the past two years has caused its price to far exceed its basic value, posing a serious speculative bubble risk. All high-risk assets that have been constantly speculated due to the Federal Reserve's crazy money printing and release of water will inevitably experience an "ebbing effect" as the Fed radically raises interest rates and shrinks its balance sheet. This time the collapse of LUNA currency, I think, is quite a wake-up call. Because compared with some previous air coins that have returned to zero, the size of LUNA coins this time is very
large. UST coin is the third largest stablecoin in the world, and the circulating market value of LUNA coin once ranked fifth among all virtual currencies. Such a virtual currency with a total market value of tens of billions of dollars has almost reached zero in just one week. Although there will still be many speculators, just like gamblers, rushing in to buy the bottom like moths drawn to the flame. Reasons for the collapse of LUNA currency According to the design of the Terra team, LUNA is Terra’s platform token, with the purpose of absorbing the volatility of UST. UST is a so-called algorithmic stablecoin, a cryptocurrency that is forcibly pegged to the U.S. dollar at a ratio of 1:1. In Terra, the team designed a mechanism to convert one dollar worth of LUNA coins into 1UST. For every 1 UST minted, 1 USD worth of LUNA must be destroyed, and vice versa. Through this mechanism, the price of UST is stabilized at around $1. Since its launch, LUNA’s reputation has been polarizing. The near-zero mortgage feature of LUNA currency makes UST the third largest stablecoin in terms of market capitalization in the crypto market. The AnchorProtocol protocol built on Terra allows users to deposit UST and obtain a stable and high annualized deposit interest rate of 20%. Many people question this as a "Ponzi scheme" and want to "empty money", but LUNA's Advocates are extremely optimistic about the project and even financed it with loans. As an algorithmic stablecoin, the price of UST should always remain at $1 to give investors greater confidence. However, on May 8, as the UST price was still at 95 cents and returned to less than 1 US dollar, the information of "UST de-anchoring" continued to ferment through market exchanges. Investors quickly responded to this "huge risk" and began to Massive selling of UST. In order to increase the price of UST to US$1, the number of LUNA is continuously increased. After the additional issuance, the price of LUNA continued to fall, but UST was gradually drifting away from its anchor. According to media reports, on May 11, UST, which was supposed to be anchored at the value of 1 US dollar, fell to 26 cents, a record low, plummeting 44% in 24 hours. Investors became more panicked, had a crisis of confidence in Terra, and sold UST and LUNA one after another. At this time, the two currencies fell into a death spiral. As of May 16, LUNA has fallen to $0.0001972, and some investors’ real money has turned into a string of zeros.
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