Terra, which traded at $118 last month, boasting of being the eighth largest crypto token, had its worst day on Thursday when it fell to $0.09 on Thursday.
Interestingly, the token saw maximum carnage in the last 72 hours, when its value fell from around $80 to pennies.
Terra Network’s algorithm-backed stablecoin UST lost its peg to the dollar, causing LUNA’s price to plummet. UST and Luna are interconnected because for every UST traded, one LUNA is burned and vice versa.
Vikram Subburaj, CEO of Giottos Crypto Exchange, said Terra was affected by the loss of investor confidence in the asset following the withdrawal of its associated algorithmic stablecoin UST.
“LUNA, which is used to peg the UST at a value of $1, lost value as investors quickly dumped the asset, while its outstanding supply fell from 350 million to 2.5 billion in 3 days to help the UST recover its anchorage”, he added.
LUNA’s market capitalization has dropped in the millions, less than $300 million to be precise. However, the volume of the LUNA token has been quite impressive, as $7.75 billion worth of tokens have been traded in the past 24 hours, according to data from coinmarketcap.
Edul Patel, CEO and co-founder of Mudrex, said that the crypto market is already bearish and could have exerted more pressure leading to the destruction of UST’s wealth.
Market experts are still optimistic about the future of LUNA and expect the token to recover in the future. However, they believe that the repeg UST may take some time and the pain may last longer.
BuyUcoin CEO Shivam Thakral said the recent LUNA crash exposed some major flaws in algorithm-backed stablecoins and the industry must act responsibly by addressing investor concerns publicly.
“LUNA will take some time to recover from this shock and it will be a good idea to switch the UST from algo to fiat,” he added in the hope that the token will gradually recover.
Market participants believe that to stabilize this ecosystem, UST needs to move closer to its $1 peg from its current trading value of $0.55, while LUNA will be distributed in this process and therefore the value of LUNA will probably remain modest.
The majority of industry experts have suggested that investors shouldn’t go all-in on LUNA until it stabilizes after the carnage. Bottom fishing should be avoided and short-term gains should be sought. Invest according to their risk appetite, they advise.
UST is likely to recover, LUNA will have to ride longer term to regain strength, said Subbaraj of Giottos. “However, the increased supply will cap its gains. We do not recommend investors buy LUNA before the UST re-anchors.”
Mudrex’s Edul Patel suggested not getting into impulse buying activity now, while BuyUCoin’s Thukral said investors should stick to the fundamentals of investing and invest according to their risk appetite.