Cryptocurrency investors never thought they’d have to ask which one of TerraUSD (UST) or LUNA would reach $1 first. On May 11, that question became the talk of the crypto-sphere as the Terra ecosystem imploded.
As algorithmic stablecoin UST lost its dollar peg, crashing to a low of around 30 cents, Terraform Labs co-founder Do Kwon took to Twitter to share his rescue plan. At the same time, the value of sister token LUNA, once a top-ten crypto project by market capitalization, plunged over 98% to 84 cents, according to CoinMarketCap. For reference: LUNA was trading north of $120 in early April.
Amid the chaos, Cointelegraph analysts Sam Bourgi, Jordan Finneseth, Marcel Pechman and Benton Yuan held an emergency edition of The Market Report, which normally airs on Tuesday, to discuss what exactly went down.
Bourgi explained the theoretical underpinnings of algorithmic stablecoins and why they’re inherently risky before dissecting how UST lost its peg. Remember all that excitement surrounding Luna Foundation Guard’s Bitcoin (BTC) purchases? That was one of the biggest red flags, Bourgi said.
Finneseth broke down the market psychology of market crashes and why investors can expect more pain in the months ahead. Yuan, meanwhile, discussed some potential theories as to who may have been responsible for orchestrating the BTC dump that triggered the panic inside Terra’s ecosystem.
Staying true to form, Pechman put the LUNA crash within the context of the global financial system, concluding that crypto and Bitcoin are still the best assets to hold.
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The views, thoughts and opinions expressed here and during the show are the analysts’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.