"The mishandling and accidental launch, lack of validation on the new
shaft and loss of faith in the team fueled Luna to lose steam immediately after
launch. The loss of goodwill was further exacerbated when the in-house legal
team within Terra resigned on May 18th during the crash of the
current Luna Classic," he added.
Here are some important
things to know about the Luna crypto crash. Terra 2.0 launches after Luna
crash, but the reborn cryptocurrency crashes again after a spectacular crash,
Terra gets a new lease of life with the rebirth of Luna and is already alive on
the exchanges, but it's off to a bad start.
In May 2022, however, flaws
in Terra's ecosystem were revealed and LUNA saw a massive price collapse. I'd
like to try to explain what happened to Terra - Luna. Certainly, this is a
high-level analysis and a deep understanding of the causes that rushed to cause
the biggest ecosystem failure in recent crypto history will require more
information and study.
The sudden collapse of the
Terra Luna ecosystem was a black swan event that had serious consequences not
only for its investors, but also for the crypto ecosystem as a whole. Many
investors lost their entire life savings that were parked in Terra coin, a
stablecoin with a market cap of over $18 billion before the collapse.
And yet, it seems investors
are fascinated by Luna's rebirth. Luna surged more than 20% on Wednesday after
Terra's announcement, according to data from CoinGecko. Even the UST rose more
than 50 percent. But the old Luna won't disappear completely, it will just
co-exist with the new and improved Luna 2.0. Holders of the old Luna, now
renamed Classic, and UST will get a share of the 1 billion new tokens.
"On paper, algorithmic stablecoins were a
good idea, but the industry is getting dangerously close to a '2008 moment' as
a result of over-ambition of a project," he said. "The VCs who backed
Terra need to think seriously about how we got to this moment." To give
you an example: Binance made an announcement on May 12, it said that as of this
time, withdrawals on the Terra Luna network will be temporarily suspended due
to the high volume of pending withdrawal transactions.
"Before this happens,
it will also be determined whether the collapse occurred due to fraud,
negligence, a coordinated attack or a market rejection of the platform. At this
time, this is not clear." "I think the Singapore government will
definitely take some action after the fork is attempted," he said.
So we can simply conclude
that not all stable currencies are created equal. Despite the luck of
overcoming the consequences, this Terra incident deserves to be an example of
investing. Through this case, what you got, you can comment below for all to
discuss. This is, unfortunately, the exact scenario that took place this month
after wealthy UST holders launched a brief attack against the stablecoin.
Investors were motivated to massively cash out their UST holdings for LUNA,
thus creating an oversupply of the token. The result was a death spiral, in
which the value and credibility of both UST and LUNA collapsed to zero.
Or in another case, in an
interview afterwards, when Do Kwon was asked to predict the number of projects
in this market that would fail, Do Kwon replied that 95%. It's worth mentioning
that after that, Do Kwon said that watching these companies "die" was
quite amusing. As regulators consider their next moves, the saga offered
industry players a moment of pause to reflect on what constitutes good
governance and sound investment.
The incident encapsulates the regulators' nightmare scenario of crypto projects going wrong and prompted US Treasury Secretary Janet Yellen to call for the regulation of stablecoins - whose selling point is their supposed stability due to their link to another currency or commodity - by the end of the year. Former lawyers for the Securities and Exchange Commission (SEC) say the agency is probably already investigating the case.
If you want to know more about this topic, feel free to leave your valuable feedback. We will be happy to help
you. All the best for your future.
(All the material in this
article is only the author's opinion, and could not be considered as
"Financial Advice")
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