The native token of the Terra LUNA/USD blockchain crashed 56% over 24 hours as its stablecoin, TerraUSD UST/USD, lost its peg for the second time in 48 hours.
What Happened: According to data from Benzinga Pro, LUNA fell from an intra-day high of $64.62 to an intra-day low of $28.03. LUNA has lost more than 65% of its value since the weekend.
The token’s price plummeted after the blockchain’s algorithmic stablecoin UST lost its peg for the second time in two days. Some reports indicate that UST fell to as low as $0.65 on Coinbase Global Inc COIN.
Why It Matters: UST’s token mechanics are set up so that traders can redeem $1 of LUNA for $1 of UST, ensuring that the stablecoin is constantly pegged to the dollar at all times.
LUNA’s sharp decline has caused its market cap to fall under that of UST, with traders unable to redeem UST for LUNA in its previous 1:1 parity.
What Else: UST briefly lost its peg over the weekend triggering the Luna Foundation Guard to loan $750 million from its Bitcoin BTC/USD reserves to market makers.
Today, on-chain data shows that Terra’s $1.3 billion in Bitcoin reserves have been drained entirely.
Despite the injection of capital, UST has failed to reclaim its peg to the U.S. dollar and the protocol’s ecosystem has remained in jeopardy.
“While buys and sells of UST are not meaningfully directional now, we felt it was valuable to have capital ready to be deployed in the current market,” said Terra founder Do Kwon.
“As markets recover, we plan to have the loan redeemed to us in BTC, increasing the size of our total reserves.”
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