Luna’s price has dropped 90 percent in the last 24 hours and 98.5 percent down from its peak of $119 in April.
These warnings do not necessarily imply that Luna will be stopped for Bithumb and Korbit. Once these specified investment warnings have expired, the platforms will decide whether to cease or continue trade.
On the other hand, the situation reveals the extent of fear among Korean cryptocurrency investors over Luna’s present drop. According to Coinranking data, Bithumb is the ninth-largest platform for Luna trading volume in the previous 24 hours.
Why this warning?
Luna’s decline occurs as TerraUSD (UST), the ecosystem’s main algorithmic stablecoin, loses its peg. The UST, which is intended to be tied to the US dollars, is currently trading at $0.42, up from $0.225 early.
Binance, another major exchange, had suspended trading in Luna, as we reported earlier when UST was de-pegged by $ 0.98 initially. Since then, the trouble has only increased for Luna and UST.
What are experts saying?
With the [UST] peg gone, a leading trader, Alex Krüger, said on Twitter that luna would fall to zero (as arbitrageurs buy UST and sell luna) unless parity with USDT and confidence was restored. Only a substantial money infusion and protocol changes will allow this to happen.
Due to a broader asset implosion that includes bitcoin, cryptocurrencies, including luna, and stock markets, the UST began to lose its peg last week. Some speculated that over the weekend, a seller saturated the market with UST to attack the stablecoin.
During this turbulence, the luna-based decentralized financial lending program Anchor was plundered $5 billion in UST.
Measures taken by the founders of Luna
Do Kwon, the developer of LUNA announced on Twitter a slew of new actions he plans to take to calm the situation. According to him, the price stabilization system is eating UST supply, but the cost of consuming so many stablecoins at once has increased the on-chain swap gap to 40%. As a result of the absorbed arbs, Luna’s price has plummeted significantly.
He continued that before $UST can attempt to re-peg, the only path forward is to consume the stablecoin liquidity that wants to exit.
He backed community proposal 1164, which proposed raising the base pool to 100 million SDR and lowering the PoolRecoveryBlock from 36 to 18 million SDR. This will increase the capacity of the mint from $293 million to $1200 million. This should make the system accept the UST more easily.
The supply surplus of UST (bad debt) should continue to diminish until parity is reached and spreads begin to heal, given the current on-chain discrepancy, peg pressure, and UST burn rate.
Naturally, holders of UST or LUNA will pay a heavy price for this, according to Kwon. He stated that he might continue to search for methods to bring in more external money and reduce UST supply.