EXPLAINED | Terra Luna Crypto Crash: Why Is LUNA Price Falling?

New Delhi: The cryptocurrency market is facing an unprecedented crash this week. At the time of writing, Bitcoin (BTC) price stood at $28,031.48, considerably lower than the benchmark of $30,000. On Indian exchanges, Bitcoin price stood at Rs 23.8 lakh. Even Ethereum (ETH) is facing a tough week, currently priced at $1,937.85 on global exchanges and Rs 1.65 lakh on Indian platforms. The biggest loser among all cryptos appears to be Terra Luna (LUNA), which crashed over 85 percent on May 11, as per CoinMarketCap data. And the reason behind this is the ‘de-pegging’ of TerraUSD (UST) stablecoin.

LUNA crash: How much did Terra Luna price drop?

As per CoinDesk, LUNA price stood at $0.37, or Rs 32.34 as per Indian exchanges. The cryptocurrency saw a drop of 55 percent on May 10, and an additional 85 percent on Wednesday. In the past couple days, LUNA investors were wiped out of 95 percent of their wealth.

LUNA price is now around 97 percent below its all-time peak of $118, as seen in April.

LUNA crash: Why is Terra Luna crashing?

The Terra ecosystem has adopted UST as a stablecoin, leading to the interlinking of LUNA and UST. A stablecoin is linked to an underlying asset, such as precious metal such as gold, or the US dollar.

UST has recently ‘de-pegged’ to $0.45 from its value of $1. This marked a drop of about 55 percent. Since both UST and LUNA are interlinked, the massive drop in UST value has resulted in LUNA’s overall drop.

As per CoinDesk, Terra’s market cap now stands at under $1 billion ($994.17 million at the time of writing). This is in stark contrast to its all-time high market cap of around $25 billion.

For now, investors can only wait for the market to progressively stabilise to help recover from the losses.