LUNA is the 12th largest cryptocurrency by market capitalization and Terra’s platform is called “Alipay on the blockchain”. So what is LUNA coin? Should you invest? What is the risk of LUNA investment? All will be answered by Taimienphi.vn in the article below.
As the prices of Bitcoin, Ether, and Dogecoin fluctuated over the past few months, investors are gradually turning to stablecoins like Terra (LUNA) because the selling price is easier to predict.
Learn about LUNA Coin What is it?
1. What is Terra (LUNA)?
Terra allows developers to build custom blockchains and DApps for a variety of use cases but focuses primarily on DeFi projects, NFTs, and Web 3.0 applications using the Delegated Proof of Stake (DPOS) algorithm. ). The platform is linked to other major blockchains including Ethereum, Binance Smart Chain, and Harmony.
UST and LUNA are the two native tokens of Terra. Where UST is a stablecoin, or in other words the UST price is pegged at 1 USD and is used for staking or swapping when the market changes. In contrast, LUNA has a value that fluctuates based on market conditions.
In essence, UST is linked to LUNA through a special algorithm. Usually a stablecoin is backed 1:1 with a tangible asset like gold, USD, to ensure the price will remain at 1 USD.
A special algorithm uses a smart contract to automatically adjust the price of the linked asset. In this case the smart contracts automatically burn LUNA tokens to mint new UST tokens, keeping the UST price stable and deflate LUNA (at least in theory). So no matter the situation, 1 UST can always be redeemed or minted for exactly 1 LUNA.
2. What is LUNA coin?
LUNA or LUNA coin is a cryptocurrency coin developed by Terraform Labs in 2018. Like other cryptocurrencies, LUNA coin also works on a blockchain network called Terra.
3. LUNA coin lost 96% of its value
At the beginning of this May, the price of UST began to decline suddenly and still cannot regain the 1 USD mark.
This sudden price drop caused a large amount of LUNA to be minted in an attempt to stabilize the UST to “flood the market”, causing an imbalance and causing the price of LUNA to plummet overnight. LUNA from one of the TOP 10 cryptocurrencies was knocked out of the TOP 150 in the blink of an eye, with the circulating supply tripled, from around 350 million to over 1.4 billion in just 2 days.
Deposits on the DeFI Anchor platform also dropped rapidly. Anchor is the primary staking platform for UST, providing investors with a 20% return on investment based on the UST tokens hosted on it. Of the $18 billion UST in circulation, $14 billion is stored on Anchor.
There had been much speculation before that a 20% return on investment would eventually cause major problems, so it was no surprise that Anchor proposed reducing its return to 4%. When the price starts to fall, the investor will try to sell off his UST in other markets.
Although Terra Labs amassed around $3 billion in Bitcoin in an attempt to start building storage, it wasn’t nearly enough to stem the slide and the company was forced to sell the remaining BTC in its wallet. In the end, LUNA and UST coins are no longer worth 1 USD, may even completely collapse without any chance to recover.
Since the UST is a stablecoin, the stability of the UST can be intrinsically related to the volatility of the cryptocurrency market. When support for either of the two linked cryptocurrencies becomes an issue, there is always the possibility that either one or both will be affected.
4. How did the Terra Luna and UST crash affect the crypto market?
Before the LUNA/UST crash, the crypto market was in a “shaken” state. Bitcoin price fell by tens of thousands of dollars, at a 2-year low (although still 10 times higher than the selling price in 2019). Ethereum, Solana, Cardano and many other top cryptocurrencies also saw a drop in price.
But that’s not all. There are always concerns about the stability of other stablecoins, especially Tether. The world’s most popular stablecoin breaks $1 for the first time in 2 years, showing massive turmoil across the cryptocurrency market.
5. Should I invest LUNA coin?
Financial experts warn investors to invest only a small amount in cryptocurrencies due to the level of risk and to avoid “losing everything”. The potential for price fluctuations is huge, which means that investors need to consider and learn well before pouring capital.
Especially when investing in LUNA, which comes with “greater risk”, investors can suffer losses if Terra stablecoins cannot “hold the price”. LUNA acts as a volatility absorber for Terra’s stablecoins, so the selling price of LUNA can “correspond” to the selling price of Terra’s stablecoins.
While Terra’s stablecoins, including UST, are pegged to USD, it is impossible to predict the future performance of any asset and whether the asset will be able to withstand the ups and downs. down or not.
On the other hand, it is all the more important that an investor be aware of the regulatory issues of a protocol before making an investment decision.
So the above article Taimienphi.vn has answered your problem What is LUNA coin?? Should you invest? Hopefully, this information will help you make the right decision before deciding to invest in LUNA or any other cryptocurrency.
What is LUNA coin?
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