@Eybyoung
more from that month
Understanding TerraUSD & LUNA Crash I'm always curious how TerraUSD crashed and how it was de-pegged in dollar when it should be “stablecoin” which means it's price doesn't fluctuate much and always close to $1 price turns out to be not so stable at all.
The de-pegged scenario happens in TerraUSD ($UST) created a mess in crypto market in general, causing extreme fear for investors especially those who invested in $LUNA which is the sister coin of TerraUSD as it was pawned to save the TerraUSD position in the market. With that, I was curious how it happens and did my research to understand the scenario properly. So here's what I've learned upon my research.. Two types of Stablecoin There are two type of stablecoins, and as we immerse ourselves in crypto we must understand these two types for us to know what stablecoin should we used if ever we like to hedge our funds against the crypto market volatility. ***Centralized Stablecoin*** Centralized stablecoins are the one that was backed by dollar physically. It has dollar reserved in banks. These are the USDT and USDC, which means they have reserve of U.S dollars in the banks as collateral backing the cryptocurrency value. When you say centralized it involves third party which is the banks. This is why others that doesn't prefer centralized as they patronize decentralized asset doesn't use USDT and USDC. *(Some doesn't like centralized stablecoins especially USDT as it has already a shady past when it keeps on printing but the actual amount is not equal on their treasury. If USDT creators runs with all the money they had they can do it.)* ***Algorithmic Stablecoins*** Algorithmic stablecoins are the decentralized stablecoin, but it doesn't have physical value like centralized stablecoins that is why it needs to be backed by other digital assets to maintain it's dollar pegged. As it doesn't have real world equivalents, they're backed by digital assets held in smart contracts on the blockchain. It also appears that **algorithmic stablecoin are still an experimental**, that is why investors should know how risky it is to invest in it. How did TerraUSD Crash? TerraUSD crash can be compared to a bank run in traditional financial world that suddenly happens in digital world. Just like in traditional banks, all money deposited are not around physically as they're using it for other purposes such as giving loans to creditor, business expansion and etc. When all people demand to withdraw their money, banks will likely collapse as they cannot meet the demand, same thing happened with UST they didn't manage to cater the withdrawal demands or selling pressure caused by the panicked investors increasing the odds that it fails to maintain it's pegged to the dollar. Some massive withdrawals of the coin from a crypto exchange happens last week, it's in Binance probably that made a speculation of a run on the coin, with that most traders added on selling pressures to flee from the asset due to FUD. The supply and demand balance was upset and made TerraUSD broke its dollar peg. Why did $LUNA crashed badly after TerraUSD crash? $LUNA is the sister coin of $UST, as it is said that $UST is an algorithmic stablecoin which means it doesn't have any reserve dollar physically so it needs to be backed by other digital assets and LUNA is the one being backed by UST. Terra also added some Bitcoin in their treasury.. In attempting to save the $UST position in the market $LUNA has been burned as well as the Bitcoin they held in their treasury to boost UST price as it drops badly. While it hurts LUNA price causing it almost went to zero. When TerraUSD value drops badly holders should burn their coin to take out from circulation and in exchange they'll get new coin which is the LUNA. In attempting to raise UST price back to it's dollar peg, Terra has to keep minting LUNA and that will be added on LUNA's supply. With TerraUSD and LUNA crashed, it shakes the crypto market as they also sold their Bitcoin holdings that cause panic sellers panic thinking big entities are now exiting in the market.
But yesterday LUNA pumps up to 6,000% which means it's trying it's best to rise up from the ashes. As of writing this article it's still in green, if I'm not mistaken the price drops to $0.000001 per LUNA which is very insane drops in the entire crypto history considering it was on top 10 on the last 7 days. While TerraUSD is still trading below $.20, still unable to regain it peg. But surely both of the coins will not be back to where it is before, some are claiming it's a ponzi scheme I am not sure of that either but who knows. Source: globalnews-ca.cdn.ampproject.org https://globalnews-ca.cdn.ampproject.org/v/s/globalnews.ca/news/8830474/stablecoin-terrausd-luna-collapse-cryptocurrency-explained/amp/?amp_js_v=a6&_gsa=1&usqp=mq331AQKKAFQArABIIACAw%3D%3D#aoh=16524195914208&referrer=https%3A%2F%2Fwww.google.com&_tf=From%20%251%24s&share=https%3A%2F%2Fglobalnews.ca%2Fnews%2F8830474%2Fstablecoin-terrausd-luna-collapse-cryptocurrency-explained%2F
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22 comments
What you think about it pumps again ? First time a big stable coin crash like this and I am also include that who have #LUNA and is in loss but I hope it pumps again.
I don't know, maybe it became a shitcoin now and susceptible to pump and dump mechanism.
I feel it was pretty calculated crash based on what people are saying. Some say it was from the people who manipulate USDT/USDC stablecoin. They did this to preserve their USDT investment, which makes me worry about other coins, such whales and predators can do this to any coin. Scary times!
Yeah, mostly claims it was calculated risk.. which is really bad because both coins claims to be decentralized but still end up being manipulated. Indeed scary!
Baka nag buy yung mga nka sell before the crash kya tumaas
Siguro baka nga, shitcoin na labas nang LUNA 😂
Imagine a supply from 400 million to 6.5 trillion in just 2 days. Luna holders totally got wrecked from the devs action to sacrifice luna.
Kaya nga talagang lumubo yung supply nang LUNA bigla 🤦 yung white paper ba nang luna nakalagay don di na sila maka mint dapat diba? But maybe they revised it after launching UST since it was the collateral
Diko alam. Pero may control sila sa token eh kaya anytime pwede pa sila mag mint.
Ah, POS ba ang LUNA?
I'm also trying to understand the concept and here you go "saved me" hehe. I must also read more about it, I'm curious more after reading this.
Medyo slow ako pagdating sa ganito pero binasa ko sya haha. Ano ba Yung pegged? Bali parang nagsacrifice ba Yung Luna para masave Yung terra usd?
Peg ba yung same price dapat sa $1.. hindi nagsacrifice kundi sinacrifice kasi from 400m supply naging 6.5T para lang e save ang UST
The fall is so dip and I guess no one saw it coming.
I got now clear answer why Luna dumped so heavily. It means we should invest in Crypto that has no sister coin but not stable?. Centralized Stable coin has privacy issue so I think we are more prone towards Alghortmic stable coin only.
Invest on crypto that is fundamentally good.. not just on hype. While on stablecoins it depends on you, everything is risky especially in crypto.
Thank you for clearing. I shall try to invest where there is minimum risk.
Everything is risky. I got burnt when I lost all the money I have in Luna and I've lost all hope on that coin getting back to how it used to be. I know it's trying so hard to come up but I am scared of pump and dump...else I would have bought at the lower price now so as to cover for the huge loss I've suffered already. Yes, there was a massive withdrawal that made it crash. Someone said they vexed a whale who held most of the coin. I don't know if they have responded to their law suit as well. Everything is just messed up and my head is spinning 😂😂🤣🤣🤣.
Sorry for your loss in LUNA, but I hope you stay strong. Who would have thought it will drop like that, no one. 🤦
Exactly. No one saw it coming and it was a very solid coin with good project until... Thanks a lot, dear.
Nahilo ako dun ah... Dami ko pa talaga Hindi alam sa cryptoverse. Ahuhu But isa lang alam ko dapat kapag naginvest ka alam mo lahat ng risk associated sa investments mo
Kaya nga, talagang risky lalo na sa crypto.