Should I invest in terra Luna Now?
The cryptocurrency market was largely shaken this week by the fall of the Terra project, which caused panic among investors and largely participated in the plunge of Bitcoin to below $27,000.
Indeed, the stablecoin UST has broken away from its $1 peg, dropping to around 20 cents, while its sister cryptocurrency, LUNA, on which the UST's peg to the Dollar mechanism is based, has meanwhile lost 100% of its value and has already been delisted from several crypto platforms.
If you're watching this video, it's because you're wondering if it's still a good time to buy this crypto now. So, let's clear it up for you.
So, watch this video all the way through so you don't miss anything.
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Now without further ado, let's get straight to the point.
$100K, $500K, $1M, $10M, that's exactly what the investors lost in Terra Luna.
This is a tragic time in the history of crypto. No other crypto has ever experienced such a fall before. Everyone has lost their money.
Yet just last week, UST had entered the top 10 cryptocurrencies in terms of market capitalization.
Recall that the project's meteoric growth was partly due to a sort of cult of personality around Terra's leader, Do Kwon. UST's popularity was also because the Anchor protocol, which also runs on the Terra blockchain, began promising returns of nearly 20% for UST deposits.
However, what happened this week now leaves the impression of a collapsing house of cards. It's really horrible.
The question on everyone's mind now is: Can UST regain its grounded position?
In our opinion, the answer is NO! We will explain why in a few moments.
UST will no longer be able to be valued at $1 like other stable coins.
In fact, UST seems unlikely, as its algorithmic mechanism for maintaining a peg to the dollar requires the use of LUNA, which is essentially dead crypto since the beginning of the collapse, unlike the leading stable coins Tether and USDCoin, whose value is supposedly backed by reserves.
The system is complex, but basically, unlike centralized stablecoin that is backed by assets, these types of stablecoin maintain their anchor through algorithms that encourage traders to take advantage of price changes.
The principle is that the minting of a new UST required the "burning" or destruction of a Luna, and vice versa. This structure allowed for arbitrage opportunities that were essential to maintaining parity; users could always exchange a Luna for a UST and vice versa at a guaranteed price of $1, regardless of the market price of either token at the time.
However, if the price of the Luna, the governance token of the Terra blockchain, falls too low, the blockchain becomes vulnerable to attack and its security framework collapses. That's exactly what happened to the Terra project this week.
Now, what about Luna?
For those who are still optimistic about this project, know that Luna is dead. We're sorry to disappoint you guys, but, don't expect Luna to return to its original price before the crash.
In fact, it is not impossible, but it is unlikely.
In the past, the stable algorithmic pieces that went awry found their peg, but the secondary pieces associated with them - which in this case is Luna - were dead.
Do you understand why Luna has very little chance of getting up? Besides, the crypto has already lost 100% of its value. So, there's really no hope.
Also, it appears that Luna is at zero, so unless investors with very deep pockets step in to publicly support Luna, the project is probably already dead.
And this prediction is very realistic. The validators of the Terra network decided to suspend the cryptocurrency network, according to a tweet, as they sought answers to a crisis that demolished UST and LUNA prices, the stability of the chain, and billions of dollars of wealth.
"The Terra blockchain has officially stopped at block 7607789. Terra validators have shut down the network in order to come up with a plan to rebuild it," said a tweet left by the validators.
Terra's founder, Do Kwon, also presented a recovery plan for LUNA.
According to Kwon, the Terra community needs to rebuild the chain and validators should reset the network to 1 billion tokens that would be distributed in several ways.
400 million units of the token should be given to former LUNA holders who have seen their coin values depreciate sharply.
400 million units should be given to UST holders on a pro-rata basis.
The last 200 million units should be split between the community pool that would be used to fund future projects and those who bought LUNA at the last minute in their attempt to help save the coin, in equal shares.
Kwon advised the community to try "to encourage its security with a reasonable inflation rate, say 7% because the fees will no longer be enough to pay for the security without the exchange fees."
It's not clear that this will be enough to restore the trust needed to revive the Terra ecosystem. Once a scam has been exposed, it seems illusory to expect it to go away.
Under current conditions, everything is unclear, so it's best to stay away in our opinion.
While Binance's CEO has asked Do Kwon to prove that he has the BTC he bought in recent weeks to secure the Terra ecosystem, the LFG has just made a transfer of 80,394 Bitcoin from its reserve to Gemini and Binance.
A good way to prove that the scam was not so huge. However, for many, this will not be enough. And we can understand why. How many people who believed in this project have seen their hopes reduced to ashes in recent days. The stories are multiplying. Some are dramatic. Some went from millionaires to nothing in a few hours. Hard to take.
But the hardest and cruelest lessons are being learned in the crypto-currency world.
There is no doubt that the consequences of the LUNA/UST case will be huge. US authorities will take a close interest in this story and push for strict regulation of stablecoins. U.S. SEC Commissioner Hester Peirce said that stablecoins would likely be regulated in light of the Terra UST crash.
That won't be a bad thing.
In any event, we expect the detractors on the subject in the coming days. Or crypto-currency opponents who are sure to have a field day. Bitcoin will likely be associated with this slump, while the king of crypto-currencies is a special species that has once again shown its resilience in the current chaos.
Will they withdraw their support and leave? Or will they try to save what's left of LUNA? Is there anything left to save?
We will know in the next few weeks, but for now, you should be very careful and STAY AWAY from LUNA. The probability of Terra's demise is greater than the probability of an extraordinary rebirth. The important thing, in our opinion, is that the community learns the right lessons so that this type of episode does not happen again.
Let's hope that investors blinded by their greed will open their eyes and be more critical in the future. We can always dream...
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