The Money of Luna Investors Has Been Wiped Out — What Should Cryptocurrency Investors Do?

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Coinmonks

4 min readMay 18, 2022

After a shaky start, Luna has been delisted by Binance and subsequently plunged into hyperinflation similar to Zimbabwe. In the aftermath, speculation shifted to BlackRock, Citadel, and Gemini. Ran Neuner, a South African cryptocurrency YouTuber, told Layah Heilpern that although they all denied being involved in the Luna attack.

Stablecoin advocates caution that it is not the right time to abandon the baby with the bathwater.

One popular example of a stable coin is Tether, backed by Ethereum. These digital assets do not rely on reserves, but rather use smart contracts to monitor supply and demand. They issue new stablecoins when the price rises. This is a great way to combat the volatility that has plagued the crypto market. But advocates of these coins warn that now is not the time to throw the baby out with the bathwater.

Some critics of stablecoins have said that they should be regulated, but others warn that now is not the time to “throw the baby out with the bathwater.” For example, the Securities and Exchange Commission (SEC) has warned that unregulated digital currencies pose risks to the U.S. financial system. However, advocates argue that now is not the time to discard a perfectly good idea, as it has helped make the cryptocurrency industry more stable. In addition, the SEC chairman, Gary Gensler, said that the crypto industry is “ripe” for scams and abuse. He also warned that his agency needed more funding for oversight of the industry.

TerraUSD

The money of investors in Luna and Terra has been wiped out, leaving many with nothing but despair. Several have turned to the internet to vent their sorrows, posting their stories on forums. Some have gone so far as to report self-harm. Unfortunately, the damage to the terra ecosystem doesn’t stop there. Investors in other crypto assets, such as bitcoin, have also sold off large portions of their portfolios, dragging the entire crypto market down.

The first step is to un-peg UST. The UST has depreciated by over two billion dollars since the first Luna ICO. If this happens, the Terra protocol will fail to properly handle the situation. It will need to sell more bitcoin reserves to repeg the currency. In addition, investors will rush to unstake UST to get a percentage of its value.

Terra’s dollar-pegged stablecoin

If you are still holding onto your cryptocurrency, then it is time to check out Terra’s dollar-pegged stable coin. This algorithmic cryptocurrency is supposed to keep its value close to $1. In a recent announcement, Terraform Labs said it would suspend the production of its blockchain, meaning that the currency will no longer be able to process transactions. However, this does not mean that Terra’s potential for use as a stablecoin is over.

Unlike traditional crypto coins, which are tied to reserves, stablecoins like Terra are entirely decentralized. They are not controlled or backed by centralized entities, meaning that they do not suffer from the same issues that traditional ones do. However, the main difference between traditional stablecoins and algorithmic ones is that algorithmic stablecoins do not rely on centralized entities to provide support for their reserve funds.

Terra’s algorithmic process of creating and then disabling a supply of Luna coin

The decentralized nature of Terra makes it immune to censorship, but its decentralization also means that it can be easily disrupted. The possibility of a cutoff of mainstream access could stall the adoption of Alice and Seashell if the decentralized network is disrupted. There are also connections between Terra and South Korea. Regardless of the cutoff, there is potential for further expansion of the Luna coin.

A Terra investor can profit from an increase in the price of their UST by buying Terra and then selling it for Luna. As long as there are enough people willing to exchange their UST for Luna, the price of Terra will increase. However, the price of Luna will decrease if the UST increases. Eventually, the price of Luna will fall below $1.10. The reason for this fluctuating trend is that Terra’s algorithmically minted coins are also a source of revenue for its holders.

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The Money of Luna Investors Has Been Wiped Out — What Should Cryptocurrency Investors Do?

TerraUSD

Terra’s dollar-pegged stablecoin

Terra’s algorithmic process of creating and then disabling a supply of Luna coin

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Written by Ashish P Kumar