LUNA Is A Proof of The Danger of Crypto, Says China’s State-Backed Publication

LUNA Is A Proof of The Danger of Crypto

LUNA and UST’s crashes to state crypto “once again, proved its own risks and that it is a bubble,” according to Economic Daily, a Chinese state-backed publication.

Beijing’s crypto ban was praised in the editorial article as “decisive, powerful, and timely,” and such actions prevent cryptocurrency dangers from spreading into China’s economy.

LUNA and Bitcoin were the ninth and 12th most popular search phrases on Weibo during the meltdown of Terra’s stablecoin structure, indicating that Chinese investors are still paying attention to cryptocurrency market volatility. Last September, China outlawed cryptocurrency trade and mining, forcing Chinese exchanges and miners to relocate overseas.

LUNA tokens serve as Terra network’s reserve fund, supporting the network’s stablecoin UST. Terra keeps its peg by minting and burning LUNA, to put it another way, the stability of UST is highly dependent on the stability of LUNA.

However, UST has dropped off its peg due to a sharp drop in the price of the governance token of Terra. LUNA is now trading at $0.000243, down over 99% in just one week, according to CoinCu data. UST has also dropped to $0.176 after recovering around the $0.9 level four days ago. With a market capitalization of about $1.57 billion, LUNA has dropped out of the top ten list of tokens by market capitalization. This is one of the most impressive large-cap token sell-offs we’ve witnessed this year, and it signals many serious concerns about the collapse of Terra network.

On May 12, Do Kwon, CEO of Terraform Labs, has revealed his plan to help the stablecoin UST recover its dollar peg.

“Before anything else, the only path forward will be to absorb the stablecoin supply that wants to exit before UST can start to repeg. There is no way around it,” he said on Twitter.

He’s supporting a proposal from the community to boost the quantity of LUNA minted every day. More UST holders would be able to cash out as a result.

“Naturally, this is at a high cost to UST and LUNA holders, but we will continue to explore various options to bring in more exogenous capital to the ecosystem & reduce supply overhang on UST,” he said.

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.

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