LUNA Drops below $5, Bitcoin Soars to ‘$138K’

With volatility taking full control of Terra’s tokens – LUNA, all bets are off and the prospect of a return to a U.S. dollar peg seems remote.

 

As blockchain protocol Terra failed to stabilize its bleeding crypto assets, panic seemed to set in overnight on May 11 in the crypto markets.

 

Data showed both the firm’s in-house token, Terra (LUNA) and stablecoin, TerraUSD (UST) seeing fresh heavy losses on the day.

 

After a mass sell-off, which some argued was “coordinated” to destroy the Terra ecosystem, UST lost its peg to the United States dollar.

 

Attempts to shore up the peg when both LUNA and Bitcoin (BTC) reserves failed, and as uncertainty gripped the market, both UST and LUNA dived to levels unimaginable just days previously.

 

Co-founder Do Kwon said that a “recovery plan” was due for release, details still scant at the time of writing.

 

Rumors circulating online suggested that other major crypto firms may be willing to contribute funds to support the peg.

 

On May 11, UST traded at just $0.27, having briefly dived to lows of $0.25, 75% below the dollar parity.

 

LUNA/USD was at $6.00, down over 90% in May alone.

 

A further unintended consequence of the turmoil came in the form of BTC/UST reaching nonsensical levels of almost $140,000 on major exchange Binance, which suspended LUNA and UST withdrawals on May 9.

 

Optimism Remains Bullish on Bitcoin

The reaction was a mixture of shock and nervousness about the recovery of the market that pervaded analysts’ thoughts.

 

Attention also focused on the largest USD stablecoin, Tether (USDT), as Tether chief technology officer Paolo Ardoino appeared equally surprised at recent events.

 

Despite potential sell pressure on Bitcoin itself, however, the largest cryptocurrency had avoided a fresh dip below $30,000 at the time of writing.

 

“I think Bitcoin has held up remarkably well under the context of the Luna saga with its forced BTC selling. There continues to be a great deal of uncertainty in the market but for now the $30k level is broadly holding up well for Bitcoin,” Philip Swift, creator of analytics platform LookIntoBitcoin, told in private comments:

 

“We are seeing a range of metrics on LookIntoBitcoin which show that BTC is approaching major ‘value’ levels where historically strong hands accumulate Bitcoin at value prices. There is also plenty of evidence that long term holders are not fazed by this near term volatility.”

 

BTC/USD, like other risk assets, faced another source of volatility on the day as U.S. CPI data was due for release.