- Terra Luna price dropped on the back of Terra losing its peg to the US dollar.
- LUNA price looks dead and gone as in the aftermath, its founder could be arrested anytime soon.
- With the dented image and lost trust from investors, a turnaround looks unlikely.
Terra Luna (LUNA) price has turned into a cryptocurrency zombie. The price action shows no heartbeat or vital signs after its sharp decline in the spillover effect from its affiliate and stable coin Terra. Stablecoins are pegged against an asset and try to remain at the same level as parking space when pulling funds out of cryptocurrencies but not wanting to go into monetary cash. With the break of the peg, questions are raised, and cryptocurrency regulations have been put back on the top of the agenda for central banks and authorities.
LUNA price is soon to be forgotten
Terra Luna price has been decimated and blown to smithereens in the spillover of its stable coin Terra. That last one, Terra, is pegged against the dollar’s value and is, via an algorithm, kept at parity to park your cryptocurrencies in a safe space digitally without having to transfer them at the cost of exchange rates towards your normal day-to-day bank account. But there is where it goes wrong, as a peg is costly, and it could even push a small country into default by doing so, let alone a tiny alt-currency in the cryptocurrency space.
LUNA price dropped even below the value of a penny stock after the peg between Terra and the US dollar broke as the dollar strength demanded too many additional assets from the company behind Terra to match the dollar’s appreciation. In several interviews, no comments or details were given on which assets the company was holding and buying to match the intrinsic value. This puts the whole $180 billion industry of altcoins at risk, as they are not regulated and thus not supported by any central bank, with former FED chair Yellen already commenting that this case illustrates that risk is exponentially growing as the product itself is growing without a set of parameters to move in.
LUNA/USD weekly chart
In its brief existence in the alt-space, LUNA will probably contribute to the fact that cryptocurrencies will get a set of guidelines and rules applied to survive the woes and moves in global markets. A pegged currency is always tricky as it almost triggered Singapore into default a few years ago as the country tried to keep its currency at the same level against the dollar, and several other big central banks have in the past let lose their caps or floors as being unsustainable to maintain and being very expensive with often a big write off for the central bank involved. The best example is when the Swiss Central Bank let go of its floor unannounced and almost made the forex market crash with some currency pairs illiquid. Back then, other central banks stepped in to provide liquidity to defend the system from crashing, but who will step in if that happens with a cryptocurrency or stable coin pair?