The algorithmic stablecoin is expected to hold a one-to-one peg to the US dollar, but plummeted to nearly $ 0.26 per dollar Wednesday night after the complex mechanisms that should have held the dollar peg failed leading to the collapse of the FSO. .
And as a result moonTerra’s twin token that powers Terra’s blockchain fell below $ 0.30 from $ 80 in 3 days on Thursday.
A good number of Indian cryptocurrency investors had Luna in their portfolios and the collapse wiped out their holdings within hours.
“It has been a good project and has given good returns over the past year.” Investors who bought the token at $ 60-70-80 a few months ago saw their investment vanish within a day, “said Vishal Gupta. a Noida based cryptocurrency investor.
The Moon crash therefore added fuel to an already nervous market, bringing all major digital assets into free fall.
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Bitcoin, the most popular cryptocurrency, briefly hit $ 26,000, its lowest since December 2020, on Thursday as the cryptocurrency’s selloff accelerated.
At 17, Thursday, Bitcoin was trading at $ 28,498 (-10.60% in past 24 hours) on Coinmarketcap.
The pain continued even in the smallest cryptocurrencies.
Ethereum fell 18.88% ($ 1966.03), Binance Coin fell 12.73% ($ 271.54), Solana fell 30.8% ($ 44.97), Avalanche fell by 24.18% ($ 29.52) and Cardano lost 25.437% ($ 0.4747).
Popular meme coins were also badly affected, with Shiba Inu down 27.06% ($ 0.00001105) and Dogecoin down 25.56% ($ 0.07845).
A big concern for the market for a while has been that even the largest stable coins, USD Tether (USDT) and USD Coin (USDC), were under pressure and lost their $ 1 peg.
With increasing volatility and uncertainty, most Indian cryptocurrency investors are now caught in a bind.
Their portfolios have shrunk significantly and cashing in would mean big losses, while they don’t dare to average, given the massive falls in currencies in recent days.
“I bought Bitcoin for $ 54,000 and averaged $ 45,000, but now it looks like the coin is in free fall. The entire portfolio is down 60%. While it’s tempting, I don’t have the conviction or the funds to buy more. I am seriously considering getting out of cryptocurrencies now if I were to get out, ”said Gopala Somani, a trader based in Delhi.
Experts say investors should be careful about investing in altcoins like Luna.
“Luna’s meteoric fall from grace has undoubtedly highlighted significant shortcomings in what could be described as investments in unregulated financial instruments. Although intelligently built, packaged and marketed for a mass retail customer base, otherwise described in the crypto glossary as ‘the community’ which consisted of over 4 million wallet holders, it was clearly based on an upward trajectory with little consideration of potential negative market conditions, “said Toby Gilbert, CEO of Coinweb.
Indian investors had never previously experienced the downfall of a high-flying crypto project like Luna, even in this volatile asset class.
Most new investors are panicking right now and social media is full of news about people who have lost large sums of money due to the current slump.
“Many Indians have invested heavily in altcoins, but most of them don’t realize that in such deep bear markets, altcoins take the biggest hit and some don’t even get back up,” said Chahal Verma, a cryptocurrency based in Gurgaon investor. “The best way to invest is to hold fundamentally strong decentralized cryptocurrencies.”
Experts say Luna’s current fiasco is a great learning opportunity for the global crypto community as it has revealed weaknesses within the algorithm-based stablecoin ecosystem.
“It is important to note that the Terra network is one of the most tech-savvy in the cryptocurrency industry and Terra UST is a pioneer in the algorithm-based stablecoin race. Luna’s crisis reaffirms the fact that cryptocurrencies as an asset are highly volatile and Investors must operate cautiously with a long-term 2-3 year horizon to remain profitable. The Luna Guard Foundation, with a massive reserve of Bitcoin reported, is doing its best to stabilize UST once again to gain investor confidence As we speak, Luna is trading below the $ 1 threshold and it may take a considerable amount of time for LUNA to recover from this, considering the numerous Luna-based projects will also be affected, “said Charles Tan, Chief Marketing Officer of Atato, a licensed MPC cryptocurrency custodian wallet.