The COO of Crypto Desk, Mostafa Gorji, recognized that the future might be too far for some cryptocurrency investors. They are attempting to win the trust of governments while marketing new financial products; some of these attempts have been successful. According to Gorji, a crypto expert, the cryptocurrency industry has been working hard to convince organizations and individuals to adopt cryptocurrencies. The COO reports that numerous people are rethinking their projections of a promising future. the future in which the collapse of several fiat currencies will lead to cryptocurrencies replacing traditional money and ending the monopoly of banks. Investors have suffered a number of losses as a result of the Terra Luna crash, which was the key element of one of the worst economic disasters. In a matter of days, its value dropped from $20 billion to nearly nothing. Additionally, the top cryptocurrencies have been affected: The second-largest cryptocurrency, Ethereum, fell 23% in five days, while bitcoin fell 17% in five days.
Why did Luna crash?
“Markets frequently rebound back by 30%. only re-testing their supports. However, the circumstances surrounding UST and its sibling currency Luna are peculiar. Why did Luna drop so much, then? Terra Luna crash reason was that UST fell to roughly 12 cents when it was supposed to be pegged to $1. As a result, Terra Luna crash brought that to its extinction.” Gorji declared.
“The loss of Luna and its associated stablecoin TerraUSD last month, however, brought to light the dangers of investing in DeFi initiatives and the possibility for catastrophic errors in the software that powers their operations”
Due to this incident, investor confidence in the bitcoin market was seriously damaged. The problems in determining their genuine value have led to significant changes since they were created more than ten years ago, according to Gorji. The idea that it was a very simple way to raise your wealth was made popular by the early, vigorous revaluations. Past achievement, however, does not guarantee future success.
Key takeaways when Luna crashed
∙ An estimated $60 billion worth of digital currency was lost in the Luna’s collapse. ∙ Tether and USD Coin, two examples of stablecoins backed by digital assets kept in banks, are not equivalent to algorithmic stablecoins such as UST.
∙ Non-surprisingly an arrest warrant has been issued for Do Kwon, one of the co-founders of Terraform Labs, the business that controlled Luna and TerraUSD.
How did Terra Luna crash?
“The value of Terra briefly placed it among the top ten cryptocurrencies.” Mostafa Gorji said. The algorithmic stable-coin system invented by Terra Luna ecosystem to be the primary reason for the catastrophe of Terra-Luna crash. On May 7, UST worth over $2 billion was unstaked, and a large portion of it was rapidly liquidated, Mostafa explained.
Mostafa, a crypto expert at Crypto Desk, discussed the collapse of terraUSD, an algorithmic “stablecoin,” which perished $60 billion of investors’ funds in a short period of time. “The Luna accident caused many people to lose their possessions”, he added. There is no expectation that stablecoins would ever depeg from the dollar; they are a backbone of the cryptocurrency industry. An audit of Tether claims that the most well-known stablecoin is backed by dollars worth of cash on hand, short-term unsecured debt, and other fixed income securities. While decentralized algorithmic stablecoins aim to stabilize market prices by preprogramming supply to correspond to asset demand.
The Terra network and its creator, Do Kwon, were well-known within the cryptocurrency world over the period of four years, but everything ended tragically. According to Gorji, the Terra Luna collapse explained above—which has already caused the global digital currency market to tremble—is widely recognized as the worst crypto disaster ever. Do Kwon presented a recovery plan for Luna after the original Luna crypto meltdown in May, and things seemed promising for a time. But ultimately, the coin dropped. It was abandoned right away. Finally, Terra released Luna 2.0, a new coin.
Do Kwon’s arrest warrant from a South Korean court was made public on September 15. This happened more than four months after UST and Luna, the two tokens that Terraform Labs had released. Do Kwon and five other individuals are currently accused of violating local market laws.
What is Luna crypto exactly?
Together with Terraform Labs, the South Korean company that powers the Terra ecosystem, Daniel Shin and Do Kown launched Terra in 2018. Gorji also noted that Terraform Labs had secured $32 million in investment.
Computational fees are imposed on transactions to cover processing expenses and stop spam. Using Luna tokens, validators can set their own minimum gas fees.
When Terra is trading at a price that is high relative to its peg, it is inferred that demand for the stablecoin is greater than supply. The protocol encourages users to mint Terra and burn Luna as a result, which drives down Terra’s price while driving up Luna’s. Users carry out this arbitrage over and over again until Terra trades at the chosen peg price. It is evident from what Mustafa Gorji explained about the Terra Luna crash that UST was not held steady at the set price.
The Terra stablecoins’ price fluctuations are absorbed by Luna, the staking token for the Terra system. Blockchain miners, often referred to as “validators,” who maintain track of and validate transactions on the blockchain and are paid with transaction fees are staked with Luna by users. Terra’s use increases along with Luna’s worth.
LUNA coin owners have the ability to stake their tokens for rewards and use their sway to vote on ecosystem governance issues. If a user does not choose a validator, their vote will be cast by default on that validator to which they are staked. Validators vote with their entire stake unless delegators specify otherwise.
Consequently, Mostafa’s explanation states that Luna has four separate roles in the Terra network:
1. A means of covering the transaction costs of the Terra network.
2. A mechanism for safeguarding Terra’s stablecoin peg.
3. Terra uses Delegated Proof of Stake (DPoS) staking to validate network transactions.
4. Voting and submitting to proposals for Terra network improvements as part of platform governance
Concluding Words
The collapse of the Terra Ecosystem may prevent the global cryptocurrency market from recovering quickly in the future, according to Gorji. Despite obstacles, the bitcoin community is constantly expanding and learning. Events like the UST collapse provide crucial lessons for the growing industry and may pave the way for the creation of more secure and reliable cryptocurrency projects in the future.
Even though LUNA is now not a smart investment, investors should still do their research and determine the best course of action. If you wish to invest in Luna or simply buy bitcoin in UAE, you can trade with Crypto Desk, a company that Mostafa Gorji co-founded. You may as well buy USDT with cash.
FAQs
What is Luna Crash’s Impact On Crypto Market?
This incident seriously undermined investor confidence in cryptocurrencies, thus we should prepare for further setbacks on the global market.
Is Luna Decentralized?
The Terra blockchain technology supported a network of decentralized stablecoins. Its currency, the LUNA, serves as a decentralized reserve as well.
History of Terra (LUNA)
Terra was founded in 2018 by Do Kwon and Daniel Shin, and the mainnet launch took place in 2019. In order to provide customers with the protection of fiat money while employing blockchain technology to conduct settlements more quickly and affordably than with traditional payment methods, Kwon and Shin launched Terra.
How to Buy Terra (LUNA)?
Luna is now only available on a relatively small number of exchanges, but in general, Crypto Desk, a crypto exchange in Dubai, allows you to trade more than 500 crypto currencies. If you want to invest in Luna or just buy bitcoin in the UAE, you can use Crypto Desk services. At Crypto Desk, you can buy USDT with cash as well.