Understand why the Earth fell (LUNA).
The launch of ZenGo, the leader of non-custodial digital wallets, published this Wednesday (11) a series of 16 tweets detailing the stage and impact of the collapse of the Terra cryptocurrency ( LUNA) performed a 95. %fall, selling for $ 1.19. What struck parity with the US currency of the ecosystem -making stabecoin, TerraUSD (UST), traded at US $ 0.65 and registered a fall of nearly 30% in 24 hours.
24-hour chart of the LUNA / USD price. Comment: CoinMarketCap
Here is a level about what is working 🧵 1/16
– thebestwallet.eth (@ZenGo) May 11, 2022
With nearly 12,000 followers on Twitter, the company recalled that the purpose of a sabalecoin is to execute a price target based on the supported fiat currency, be it the US, Euro or Korean currency. for example.
Regarding how stabecoin achieves parity, ZenGo points out that the use of the Terra LUNA ecosystem is one of the three most important functions for stability. In the case through algorithms, without the need to keep the US currency to maintain stability. That is, in this case, done using the LUNA symbol, to calculate short -term changes that reach US $ 1 in LUNA as 1 UST.
The balance is obtained by the need to change the LUNA for minting a similar asset at UST, who will manage the supplies and, therefore, maintain the stability of the stablecoin.
The machine soon began to increase demand for UST by switching to LUNA so that investors could get quick arbitrage money and help melt the supply to further increase the price. Similarly, when the UST is listed below US $ 1, the value is re -adjusted by the arbitrage property through LUNA, in this case, to re -adjust the stablecoin upwards.
On the last 9 days, the price of LUNA started to fall rapidly due to the separation of debts which could be explained by using the symbol to prove the payment, according to the explanation. and ZenGo.
The rise of cryptocurrencies began because, with liquidations, the cryptocurrency market began to approach self -sufficiency, leading to a protocol to sell to LUNA to cover the balance, which fed the fallout. in cryptocurrency.
At the same time, the increase in sales of cryptocurrencies in currencies has reduced demand for UST, reducing the price of stablecoin to a time high enough to restore the value of UST. the UST above, in this case the change. for US $ 1 per share of UST holders.
Since then, the Terra ecosystem has seen a massive sell -off of UST, a press that took the stablecoin down to $ 0.74 in 12 hours. On the other hand, Financial Trust Foundation (LFG), which holds a large amount of Bitcoin (BTC), allegedly used the management of 42,500 BTC, instead of $ 1.4 billion, according to measuring to maintain stability. In March, LFG received $ 1.1 billion from Terraform Labs as a trust.
7-day chart of the UST/USD pair. Comment: CoinMarketCap
But the largest cryptocurrency in the market recorded major falls, even bumping the $ 29,000 support and down around -6.5% in the past 24 hours, according to a report by Cointelegraph.
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