Luna Crypto Crash Raises Concerns About Cryptocurrencies
The crypto world has been shaken and not in a good way
In the last week, Bitcoin’s value plummeted, reaching peak lows ever since its peak in November 2021. It dropped below $30,000 for the first time since July 2021. And, with Bitcoin falling, the entire crypto market collapsed. Some investors, specifically those with Terra (LUNA) and TerraUSD (UST), have lost tens of thousands in savings. The crash seems unthinkable at first glance, given how both cryptocurrencies experienced a bearish trend in the past month.
As per Investopedia, the crypto markets are in such turmoil that losses have reached an astronomical $600 billion a week. Luna and TerraUSD fell more than 99%, with Luna’s official Twitter page mentioning how they’d be giving $500 to all those who liked their tweet to make up for their losses at one point.
The crypto crash panic extended towards social media, with a dreadful outpour of investors mourning their losses filling up the associated subreddits and dominating the trending sidebar on Twitter. Panic reached such levels that some forum mods had to pin suicide headlines at the top of the Cryptocurrency subreddit and many other associated threads.
The meltdown led some crypto investors to believe that LUNA and UST are Ponzi schemes or pump and dump scams due to their hyped-up marketing and the significant investment Terra secured. The lack of measures to lessen the damages caused by the UST and LUNA crash lends some credibility to this school of crypto thought.
It is believed that LUNA will never recover its value after getting knocked down 98% compared to its April peak. Still, consumer sentiment and trust in algorithmic stablecoins and cryptocurrencies, in general, are likely to be affected in the long term.
Stablecoins are believed to maintain their value due to their backing by fiat currencies. However, TerraUSD’s burn and mint mechanic evidently backfired, and its Bitcoin-backing didn’t help mitigate the collapse.
The crypto bubble has burst, as many crypto experts, supporters, and detractors alike, have expressed.
Other Redditors expressed how they doubt that anything illegal happened, considering how the dangers of both algorithmic stablecoins had been explicitly discussed, with many crypto investors predicting the crash beforehand.
It should be noted that, no matter how ‘stable’ a stable coin, one should never invest all of their savings in any financial vehicle. Extra care should be taken with crypto, as it has always been known as a very volatile investment, and due research should be performed on any crypto before investing in it.