Analysis

LUNA Price Analysis: Terra (LUNA) Slumps 14% This Week

Terra (LUNA), the native token on the same blockchain, fell to a more than one-month low this week due to a price shock generated by the release of 10 million tokens into circulating supply. This week, LUNA price plummeted 14% and is now trading near a one-month low of $81.34. This week, it is also one of the worst-performing cryptocurrencies.

The majority of the token’s losses are the result of a contribution of 10 million LUNA tokens to the Luna Foundation Guard (LFG). Terraform Labs, the principal Terra developer, donated the donation, which will be used to boost the LFG’s stablecoin reserves.

LFG’s reserves, which back the stablecoin UST, are valued at approximately $2.45 billion, with Bitcoin accounting for over 70% of the total (BTC). The LUNA gift was recently used to purchase extra BTC for the reserve by the community. However, the 10 million tokens came from Terraform’s non-circulating LUNA reserves as well. Their emergence into active, circulating supplies resulted in a deflationary influence on LUNA prices. The price of the token dropped by more than 6% as a result of the contribution.

The reserves held by LFG are an attempt to boost UST’s legitimacy as a totally decentralized algorithmic stablecoin. The reserves are intended to serve as a buffer against extreme liquidity shocks. But Terra’s high concentration of BTC in its reserves has triggered some LUNA selling. BTC’s price swings are enormous, rendering it unsuitable for use as a reserve currency. The value of Terra’s reserves has hit a one-month low when compared to BTC.

A contribution of 10 million LUNA tokens to the Luna Foundation Guard (LFG)

LUNA has been criticized for having a non-circulating supply controlled by Terraform Labs that is considerably greater than the token’s circulating supply. The launch of these tokens may cause more volatility in LUNA pricing. According to Terra Analytics data, 383 million LUNA tokens are locked, with 358 million tokens in circulation.

Terra Analytics data

Terraform and the LFG has managed to solve the supply gap by burning LUNA on a regular basis to mint UST. The move inflates the token’s pricing while also generating a more stablecoin for circulation. In LUNA’s existence, roughly 132 million tokens were burned prior to the donation. However, if more LUNA is released from Terraform’s reserves, the token is still vulnerable to external shocks.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

Join CoinCu Telegram to keep track of news: https://t.me/coincunews

Follow CoinCu Youtube Channel | Follow CoinCu Facebook page

KAZ

CoinCu News

Victor

Recent Posts

Solana memecoins crash while DTX Exchange hits 100,000 TPS on layer-1 blockchain

Discover how DTX Exchange's historic achievement of 100,000 transactions per second on a layer-1 blockchain…

3 minutes ago

Strategic Bitcoin Reserve Expected to Cut 35% of US National Debt by 2049

VanEck suggests the U.S. could reduce its national debt by 35% by 2050 through a…

10 minutes ago

The New Lead of Presidential Crypto Council Appointed by Trump Is Bo Hines

President-elect Donald Trump named Bo Hines as the executive director of the presidential crypto council.

34 minutes ago

Best New Meme Coins with 1000X Potential: BTFD Coin’s Hot BIG50 Discount As Baby Doge Coin, Dogs Takes Gaming to the Next Level

Explore the best new meme coins with 1000X potential. Learn how BTFD Coin leads with…

2 hours ago

BlockDAG Surges Past $170M as BDAG250 Bonus End Countdown Begins – Aave Targets $400 & Solana Shines with Scalability

BlockDAG crosses $170.5M in presale success with BDAG250 bonus and Whitepaper V3 launch! Solana grows…

3 hours ago

Qubetics Presale Price Surge Approaches: The Best Coins to Invest in Right Now While Toncoin, and XRP Gain Traction

Discover why Qubetics, Toncoin, and XRP are the best coins to invest in right now.…

4 hours ago

This website uses cookies.