Terra LUNA Crypto Crash - Wiped Out $45 Billion In A Week But Will It Recover?

With cryptocurrencies and NFT considered the big buzzwords in the market, people are now turning their attention to various promising projects. The cryptocurrency market has seen major growth and has made various people millionaires and billionaires. It's not that crypto is very strong and not vulnerable at all. If we talk about the current crypto market, it is a low time for all cryptocurrencies as they see a dip in their prices. But, crypto collapses like Terra LUNA are becoming more frequent, which raises numerous questions among investors.

In this article, we will dig into more about Terra LUNA and will know what happened to Luna crypto. We will also discuss if Terra LUNA can recover from the losses it caused to its investors.

What Is Terra LUNA?

Like Bitcoin, Terra is a blockchain, and, like the ether token of Ethereum, We can store them in a Hardware Crypto Wallet , Terra has its native token called the LUNA token. If you wonder what LUNA's trading value was before it collapsed, it was at $85. To maintain LUNA's long-term growth, a deflationary protocol was practised. If you want to create UST, you have to burn LUNA, so the more people buy UST, the more LUNA will be burned, which will make LUNA's supply more valuable.

Terra Labs was the creator of LUNA, a native token used to keep TerraUSD (UST) stable. It had a $US dollar value pegged at 1 US Dollar to 1 LUNA Token. If UST ever went below $1, then LUNA could be used to "mint" new U.S. dollars, helping to stabilize UST, and if it goes above $1, then UST will be bought for LUNA to stabilize its value. This process was done automatically with the help of an algorithm.

What Happened To LUNA Crypto And Why Did It Crash?

LUNA, the native cryptocurrency of the Terra Blockchain platform, recently suffered a sharp price crash. In the span of just a few hours, the price of Luna fell from around $85 to $0.40 – a decline of more than 95%.

So, what happened? It appears that inflationary pressures caused the LUNA price crash. Before it collapsed, the total number of LUNA tokens circulated in the market was 350 million, and today it's 6.5 trillion, which is a 1,857,000% jump in the supply and that too in just a few weeks. The exact details of why Luna crashed are to do with the algorithms that underpinned LUNA and other stablecoins, like TerraUSD and others.

There was an initial UST crash, but holders of TerraUSD still sold their shares from the panic. That is when the real problems struck - because there was a greater supply of LUNA and more panic selling, so there was a higher LUNA supply on top of that. This resulted in the crash of LUNA to more than 90% of its value.

Will LUNA Crypto Recover?

It's been a wild few months for cryptocurrency. After hitting an all-time high in early January, the market took a nosedive in February and has been on a roller coaster ever since. Terra LUNA was the hardest hit, which saw its price drop of over 90% in just a matter of weeks. If LUNA can recover its previous price of $80, then it can be burned enough to reach its market supply chain of 350 million. This procedure was also suggested by the Binance CEO, Changpeng Zhao.

Is LUNA Crypto A Good Investment?

Binance is warning against buying LUNA after its sharp price decrease. It may be a good investment if you think it will recover soon, but they currently have a market cap of $1.19B. If you believe it could be worth a lot more and could move at least 10x to recover around $10-12 billion in market cap, then you can invest in it. But, only invest in it what you can afford to lose as LUNA is highly volatile, and its future is very uncertain in the current scenario.

Conclusion

In conclusion, we would say that no one can give you a definite answer whether LUNA will recover or not. The market is highly volatile, and anything can happen. So, invest only what you're willing to lose. While LUNA's recovery is still up in the air, the crypto industry will be keeping a close eye on its progress. What happens to LUNA could set the tone for other digital assets in the months to come.