One Click Crypto
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One Click Crypto

How Did AI Respond To The Terra (LUNA) Meltdown?

Case Study of AI trading bots versus Terra (LUNA) during the May, 2022 crypto crash.

“Luna will hit $1 before UST” was one of the most shared tweets.

A huge blow to industry confidence

The collapse of the LUNA and UST crypto-currencies wiped out a lot of people’s fortunes. Not only hedge funds didn’t know about the risks of staking algo-stablecoins, but so did regular users. Some even lost their life savings.

The depegging of UST. Source OKX

Regulators took the bait.

The collapse of the Terra coin is fuel for crypto critics in Congress. The lack of regulations, user protections, and risk-mitigation systems is cited as part of the reason behind its collapse.

AI Trading Bots’ Response To LUNA

On May 7, 2022, LUNA started its descent from $80 per token to oblivion. On May 11, it reached $1, and the next day it was $0.01, which disappointed all the project investors.

A trading bot that traded a LUNA pair for over four months. Source: OBC app.
Trade history of one of the AI bots that fell under the LUNA apocalypse. Source OBC app.
Screenshot of daily strategy return vs LUNA return during May 14 — May 15, 2022. Source: OBC app
Another feedback from one of the users about the stop-loss feature.

Can (Un)stable Coins Crash The Market?

In light of the UST debacle, investors may be wondering how successful stablecoins will be in their role of providing liquidity to the crypto market.

Experts’ opinions

The UST crash has caused investors to question their trust in the stablecoin structure. The way other stablecoins work will also be called into question, Chis Skinner, a fintech expert, says. Investors should do their research and make sure they understand the risk and exposure involved, he adds.

The good things from the situation:

The UST crash could boost other stablecoins like USDC and USDT. Adil Abdulali, head of portfolio management at Securitize Capital, says it will allow other stablecoins and algorithmic experiments.

Concerns about retail investors

Investors must treat stablecoins like any other investment. Even if a person is confident that he will not lose his investment, there is always a risk. While stablecoins are a great way to keep your free capital when markets are not favorable, it is still better not to put all of your eggs in one basket.

Summary

LUNA and UST meltdowns have been terrifying experiences for all the people invested in the project. This event highlighted the importance of risk management and portfolio diversification when investing in cryptocurrencies. When within 24 hours the value of your portfolio can go down by -99%, you never want to leave yourself unprotected.

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