The native token of the Terra (CRYPTO: LUNA) blockchain crashed 56% over 24 hours as its stablecoin, TerraUSD (CRYPTO: UST), lost its peg for the second time in 48 hours.
What Happened: According to data from Benzinga Pro, LUNA fell from an intra-day high of $64.62 to an intra-day low of $28.03. LUNA has lost more than 65% of its value since the weekend.
The token’s price plummeted after the blockchain’s algorithmic stablecoin UST lost its peg for the second time in two days. Some reports indicate that UST fell to as low as $0.65 on Coinbase Global Inc (NASDAQ:COIN).
Why It Matters: UST’s token mechanics are set up so that traders can redeem $1 of LUNA for $1 of UST, ensuring that the stablecoin is constantly pegged to the dollar at all times.
LUNA’s sharp decline has caused its market cap to fall under that of UST, with traders unable to redeem UST for LUNA in its previous 1:1 parity.
What Else: UST briefly lost its peg over the weekend triggering the Luna Foundation Guard to loan $750 million from its Bitcoin (CRYPTO: BTC) reserves to market makers.
See Also: Why Terra Is Planning To Add $10B In Bitcoin Reserves
Today, on-chain data shows that Terra’s $1.3 billion in Bitcoin reserves have been drained entirely.
Despite the injection of capital, UST has failed to reclaim its peg to the U.S. dollar and the protocol’s ecosystem has remained in jeopardy.
3/ While buys and sells of UST are not meaningfully directional now, we felt it was valuable to have capital ready to be deployed in the current market.
— Do Kwon (@stablekwon) May 9, 2022
As markets recover, we plan to have the loan redeemed to us in BTC, increasing the size of our total reserves.
“While buys and sells of UST are not meaningfully directional now, we felt it was valuable to have capital ready to be deployed in the current market,” said Terra founder Do Kwon.
“As markets recover, we plan to have the loan redeemed to us in BTC, increasing the size of our total reserves.”
