The price of LUNA, the governance token of the Terra blockchain ecosystem, fell sharply on Tuesday.
LUNA’s Recent Price Action
Most cryptocurrencies are down about 20% this week due to the recent crypto outbreak. Terra Luna, on the other hand, has lost almost 78% in the last seven days, while its stablecoin TerraUSD (UST), which is presently trading at about $0.80, has lost over 19%. Multiple analysis have tried to explain what’s happening with Terra Luna and why UST can’t keep its $1 price.
According to CoinGecko, LUNA was trading above $40 on Monday. LUNA hit an all-time high of $116 in early April.
The price of the token has dropped by more than 60% in the last 24 hours due to broader market instability and, in particular, UST, the Terra-tied stablecoin.
Some sources have iterated that traders and whales are taking advantage of the depegged price of UST with LUNA by effectively buying UST at a discount, converting it to LUNA, then dumping the LUNA on an exchange and repeating the process.
Several exchanges took steps to help the market by limiting arbitrage opportunities and slowing the selloff for LUNA and UST, exchanges like Binance have suspended withdrawals on Terra Network.
Do Kwon, the founder of the LUNA token and TerraUSD (UST) stablecoins, has been active on Twitter today in response to the big selloff, implying an announcement of a UST recovery plan.
“The rumor is that Do Kwon reached out to several companies, trying to raise another $1-$1.5 billion to use that to stabilize UST. The promise is that these companies get to buy LUNA half off and they’re going to be locked in for two years.” According to crypto YouTuber George from CryptosRUs.
A media outlet also reported on Tuesday that the Luna Foundation Guard, a non-profit dedicated to preserving the Terra ecosystem, was aiming to raise more than $1 billion to help the market.
The algorithmic stablecoin, which depends on market incentives to maintain parity with the US dollar, dropped as low as $0.60 on Monday before recovering. After soaring to a 24-hour high of $0.94, the UST is currently trading at about $0.69 on Binance. On Saturday, a number of market events heightened volatility around the stablecoin.
Equities markets have also seen volatility and falls since the start of the year, owing to increasing prices and macroeconomic conditions fueled by the Ukraine conflict, albeit Tuesday’s performance was more muted than Monday’s.
