Falling down the altar in one day.
On May 12, the cryptocurrency market continued its multi-category decline, with LUNA shedding more than 99%. According to Binance trading data, LUNA was trading at $2.3843 at 0:00 on Monday, while at 21:00, LUNA was trading at $0.02018, a drop of more than 99%. LUNA was worth noting as high as $119.55 at one point.
LUNA's plunge has brought down the entire virtual currency market. On May 12, the price of bitcoin plunged again after falling 7.27% in the previous session to $25,174.8, nearly halving its annual high. In addition, cryptocurrencies such as Ethereum, Dogecoin, Binancin and Adacin all fell more than 20%.
A total of 175,791 positions in the cryptocurrency market exploded in the last 24 hours, or about $646 million, or 4.1 billion yuan, according to Contract Data.
It is worth mentioning that after the emergence of virtual currency, because bitcoin and other virtual currencies fluctuated too much, some people later created the "stable currency" in virtual currency. Why is the stablecoin unstable?
According to the analysis, the collective plunge in cryptocurrencies is believed to be related to the decline of the stable currency TerraUSD, which is pegged to the US dollar.
In the crypto world, staboins have been serving as a bridge between the real world and the crypto world, while decentralized algorithmic staboins are known as "coinage rights" belonging to crypto natives. TerraUSD, also known as UST, is the top algorithm stablecoin and once ranked in the top three in stablecoin category.
UST was supposed to be a "stable peg" to the dollar, keeping the price anchored at $1 by coordinating with its floating-price sister, Luna, to keep supply and demand in balance. Each time a UST is cast, $1 worth of Luna is destroyed or removed from circulation, and vice versa.
The reason for Terra's normal operation of this mechanism is that LUNA's market value is higher than THAT of UST. However, when extreme circumstances occur, the market value is inverted. LUNA will not be able to achieve price anchoring, and there will be a downward death spiral.
"The last 72 hours have been very difficult for everyone," said Kwon, founder of Terra Currency. "I am determined to work with everyone to get through this crisis and find a way to help ourselves." However, the currency circle industry warning: if UST did not save back, do not easily try to copy LUNA.
Jiang Zhaosheng, a senior researcher at THE Oueske Cloud Link Research Institute, said the sharp fluctuations in LUNA's price are mainly the result of the unanchored UST price of the algorithm. Combined with the impact of external factors such as the us stock market plunge, the mood of the entire crypto market is increasingly panicky, LUNA is under greater selling pressure, and the price has also started to show drastic fluctuations.
Some market participants point out that the recent continued decline of bitcoin is mainly due to the US interest rate hike and shrinking of the balance sheet. In the last two years, a number of traditional financial institutions have entered the bitcoin market. For them, bitcoin is nothing more than an asset to deploy. When global financial markets are doing badly, these funds tend to dump bitcoin, causing the bitcoin market to follow the U.S. stock market.