Luna cryptocurrency drops to $0 as UST drops from parity; bitcoin goes up

Bitcoin staged a rally on Friday, jumping above $30,000 despite ongoing problems with stablecoin TerraUSD that have caused a panic in the crypto market.

Bitcoin, the world’s largest cryptocurrency, was trading at around $30,262.85 at 4 a.m. ET on Friday, according to data from CoinGecko, up 8% in the last 24 hours after it fell to levels not seen since late December. 2020 earlier this week.

However, the digital currency is still down 16% in the last seven days.

The recent collapse of cryptocurrencies, which has seen billions of dollars removed from the market, has been caused in large part by the fall of a controversial stablecoin known as TerraUSD or UST, which is supposed to be pegged one to one with the US dollar. .

However, UST has lost its peg and was trading around 14 cents on Friday, according to data from CoinGecko.

Luna, a token closely associated with UST, is now worth $0 as a result.

UST and moon are linked. UST is called an algorithmic stablecoin, which means that its parity of $1 is supposed to be governed by an underlying code. That’s fundamentally different than other stablecoins like Tether and USDC, which are backed by real-world assets like bonds. UST has no reservations in the real world.

The UST algorithm works through a complex token minting and burning system to maintain price stability. A UST token is created by destroying part of the related cryptocurrency moon to maintain parity with the dollar.

But extreme market volatility has put UST to the test and it has been unable to maintain parity.

Adding further complications is the fact that the Terra blockchain that underpins UST and Luna stopped processing transactions twice in less than 24 hours.

In addition to the UST saga, crypto markets have been hit by a number of other headwinds, including higher inflation and interest rate hikes that have caused a sell-off in global stock markets that has leaked out. The price movements of cryptocurrencies have been correlated with the stock markets.

“The Luna/UST situation has affected market sentiment quite a bit. Overall, most cryptocurrencies are down [more than] fifty%. Combine this with global inflation and growth fears, it doesn’t bode well for cryptocurrencies overall,” said Vijay Ayyar, vice president of corporate and international development at cryptocurrency exchange Luno.

Even the big bitcoin bounce may not be sustainable.

“In such markets, it is normal to see bounces amounting to 10-30%. These are normally bear market bounces, testing previous support levels as resistance,” Ayyar said.

Leave a Reply

Your email address will not be published.