The price of terra (LUNA) has again taken a beating in recent hours. Where LUNA traded above $30 yesterday, the price has now fallen below $10.

UST problems lead to LUNA crash

The crash of terra is a result of the problems at terraUSD (UST). The stablecoin aims to maintain a stable value of $1 per UST, but its link with the dollar recently lost.

Why the stablecoin’s value began to decline is not exactly clear. However, it seems to be largely related to the overall crypto market turning red in recent days. The prevailing panic may have started the chain reaction resulting in a bank run on UST. People are selling their UST en masse, as a result of which the supply has increased sharply, while the demand is actually decreasing.

Luna Foundation Guard is selling all its bitcoins

To somewhat absorb the blow, the Luna Foundation Guard has already sold all its bitcoins (BTC). The bitcoin reserve was intended for these kinds of scenarios and the sale of BTC must provide liquidity to support the value of UST.

However, this doesn’t seem to have any effect yet. UST is trading at $0.70 at the time of writing. Also, the market capitalization (the total value of UST in circulation) decreased by $4 billion. Users seem to be increasingly getting rid of their UST, which is also one of the reasons LUNA is falling sharply. UST can be converted into LUNA with which the LUNA supply increases.

“On May 10, 46,239,360 LUNA was issued and more than 80 million additional LUNA was issued in the past 4 days. UST stock destroyed more than 1.89 billion in 4d, and on May 10, 1.2 billion UST was destroyed, a new record for destruction in one day.”

At the time of writing, LUNA is down 73% from 24 hours ago. Compared to 7 days ago, the altcoin is even almost 90% in the minus.


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