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UST’s decline has prompted calls from the US government on the stablecoin regulation.
Terra Network’s LUNA has dropped to under $5 following a 90% weekly plummet. The price action represents one of the biggest drops for major crypto, according to data on Coingecko.
Aside from that TerraUSD, UST, has also now plummeted to an all-time low – and continues to fall further.
Unsurprisingly, Anchor’s TVL has dropped by $11 billion over the past 48 hours following a $17 billion high barely 7 days ago. Anchor is the DeFi platform that provides yields on UST deposits.
UST is structured to retain a $1 value based on a complex algorithmic strategy involving burning UST to mint LUNA, and vice versa.
Social sentiments among investors and traders across different social media sites remain negative for LUNA, even as the token continues to take a beating. According to available information, the selling pressure on LUNA came following its parent foundation’s move to sell all of its Bitcoin holdings after UST depegged.
Effect of Monetary Policy on Terra Network’s LUNA
UST’s decline has prompted calls from the US government on the stablecoin regulation. Janet Yellen, the Treasury Secretary said that TerraUSD is a rapidly growing product with rapidly growing risks, with reference to its recent run and value drop.
The downtrend also has firms in a confused state as Binance halted LUNA withdrawals briefly until the network regained stability and the volume of pending withdrawals reduced.
Kwon’s Attempt to Calm Investors
Terra’s co-founder Do Kwon, in a tweet, promised a recovery plan for UST as the stablecoin violently de-pegged from the USD. The embattled executive has been criticized after being silent for almost 24 hours as the crisis engulfed his blockchain’s two flagship cryptocurrencies worsened.
Responding to the criticism, Kwon asked investors to “hang tight” and wait for more updates as he “needed razor focus to deliver”.
There was still silence from the executive eight hours later, with no solid proposals to support the selloffs. As if to make another attempt at calming the already anxious traders, Kwon tweeted: “Getting close…stay strong lunatics”.
Getting close … stay strong, lunatics
— Do Kwon 🌕 (@stablekwon) May 10, 2022
What Is Happening Now?
Data from CoinGecko shows that LUNA was trading above $40 on Monday. LUNA posted its all-time high in early April above $119. So far there is no end in sight for the downtrend as both UST and LUNA continue the freefall. With things moving this fast, chances are very low that any salvage plan from Kwon will suffice to recover investor losses.
Crypto pundits however cling to the hope that although Terra’s situation has shaken the entire crypto universe, its impact on BTC remains relatively limited.