{"id":26774,"date":"2022-05-13T06:39:04","date_gmt":"2022-05-13T10:39:04","guid":{"rendered":"https:\/\/coinscreed.com\/staging\/?p=26774"},"modified":"2024-07-28T08:26:43","modified_gmt":"2024-07-28T12:26:43","slug":"luna-ust-stablecoin-price-crash-explained","status":"publish","type":"post","link":"https:\/\/coinscreed.com\/staging\/luna-ust-stablecoin-price-crash-explained\/","title":{"rendered":"LUNA, UST Stablecoin Price Crash, Here&#8217;s what happened"},"content":{"rendered":"\n<p>Following the recent update on the downfall of the <a href=\"https:\/\/coinscreed.com\/staging\/terra-co-founder-spouse-seeks-protection-as-luna-price-collapses.html\">LUNA<\/a> price here are the reasons LUNA and UST Stablecoin fell to nearly zero<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img fetchpriority=\"high\" decoding=\"async\" width=\"780\" height=\"449\" src=\"https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/LUNA-UST-Stablecoin-Sudden-Crash-Here-Is-Why.jpeg\" alt=\"LUNA, UST Stablecoin Price Crash Explained\" class=\"wp-image-26789\" srcset=\"https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/LUNA-UST-Stablecoin-Sudden-Crash-Here-Is-Why.jpeg 780w, https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/LUNA-UST-Stablecoin-Sudden-Crash-Here-Is-Why-300x173.jpeg 300w, https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/LUNA-UST-Stablecoin-Sudden-Crash-Here-Is-Why-768x442.jpeg 768w, https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/LUNA-UST-Stablecoin-Sudden-Crash-Here-Is-Why-150x86.jpeg 150w, https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/LUNA-UST-Stablecoin-Sudden-Crash-Here-Is-Why-750x432.jpeg 750w\" sizes=\"(max-width: 780px) 100vw, 780px\" \/><figcaption>LUNA, UST Stablecoin Price Crash Explained<\/figcaption><\/figure>\n\n\n\n<div class=\"wp-block-rank-math-toc-block\"><ul><li><a href=\"#h-what-is-behind-luna-ust-fall-in-price\" >What Is Behind LUNA, UST Fall In Price?<\/a><ul><li><a href=\"#h-1-luna-was-paired-with-ust\" >1. LUNA Was Paired With UST<\/a><\/li><li><a href=\"#h-2-the-mint-and-burn-mechanism\" >2. The Mint-and-Burn Mechanism<\/a><\/li><li><a href=\"#h-3-terra-builder-alliance-stopped-using-ust-as-an-algorithmic-stablecoin\" >3. Terra Builder Alliance Stopped Using UST As An Algorithmic Stablecoin <\/a><\/li><\/ul><\/li><li><a href=\"#h-binance-halts-trading-for-terra-delists-luna-ust\" >Binance Halts Trading for Terra, Delists LUNA, UST<\/a><\/li><\/nav><\/ul><\/div>\n\n\n\n<p>According to data from CoinMarketCap, the price of Terra's native governance and staking token, dropped 99.97% yesterday and is now trading at $0.00005395.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-behind-luna-ust-fall-in-price\">What Is Behind LUNA, UST Fall In Price?<\/h2>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"h-1-luna-was-paired-with-ust\">1. LUNA Was Paired With UST<\/h5>\n\n\n\n<p>The reason for LUNA's free fall is that it was paired with UST.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"891\" height=\"518\" src=\"https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/image-77.png\" alt=\"Reason For LUNA, UST Stablecoin Crash\" class=\"wp-image-26787\" srcset=\"https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/image-77.png 891w, https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/image-77-300x174.png 300w, https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/image-77-768x446.png 768w, https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/image-77-150x87.png 150w, https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/image-77-750x436.png 750w\" sizes=\"(max-width: 891px) 100vw, 891px\" \/><figcaption>Reason For LUNA, UST Stablecoin Crash. Source: Tradeview<\/figcaption><\/figure>\n\n\n\n<p><a href=\"https:\/\/coinscreed.com\/staging\/terraform-labs-proposes-emergency-measures-support-luna-and-ust.html\">UST<\/a> is a stablecoin based on an algorithm. Unlike stablecoins like USDC and USDT, which are backed by real-world assets, algorithmic <a href=\"https:\/\/coinscreed.com\/staging\/secs-peirce-says-stablecoins-regulations-must-embrace-trial-and-error.html\">stablecoins<\/a> are not. Instead, this type of stablecoin is run by smart contracts that run themselves.<\/p>\n\n\n\n<p>With this arbitrage between the stablecoin and LUNA, there was pressure to sell LUNA, which made the token crash happen faster.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"h-2-the-mint-and-burn-mechanism\">2. The Mint-and-Burn Mechanism<\/h5>\n\n\n\n<p>The Terra token is designed to help stabilize UST at its dollar peg with a \u201cmint-and-burn\u201d mechanism. Users could swap $1 worth of LUNA for UST, and vice versa. Each time Terra's token is swapped for the algorithm stablecoin, that LUNA is also burned.<\/p>\n\n\n\n<p>This week, though, this mechanism was put under a lot of pressure, and UST's dollar peg began to slip quickly. <\/p>\n\n\n\n<p>As investors tried to get out of the algorithm stablecoin and into Terra, a lot of LUNA tokens were made.<\/p>\n\n\n\n<p>CoinMarketCap says that the UST, which used to be tied to the dollar, is now trading at $0.17.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"h-3-terra-builder-alliance-stopped-using-ust-as-an-algorithmic-stablecoin\">3. Terra Builder Alliance Stopped Using UST As An Algorithmic Stablecoin <\/h5>\n\n\n\n<p>Also, the Terra Builder Alliance, a group trying to save the Terra ecosystem as it falls apart, made a plan today to stop using it as an algorithmic stablecoin for good.<\/p>\n\n\n\n<p>According to the proposal, once all the algorithm stablecoin have been traded for Terra tokens, the stablecoin will no longer exist in its current form.<\/p>\n\n\n\n<p>The goal of the proposal is to make a &#8220;collateralized stablecoin,&#8221; but it's not clear how that would work.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-binance-halts-trading-for-terra-delists-luna-ust\">Binance Halts Trading for Terra, Delists LUNA, UST<\/h2>\n\n\n\n<p><a href=\"https:\/\/coinscreed.com\/staging\/binance-futures-delists-luna.html\">Binance<\/a>, the largest cryptocurrency exchange in the world, said today that it has taken both Terra and the stablecoin off its list. <\/p>\n\n\n\n<p>At 12:40 a.m. UTC today, the Terra tokens were taken off both the margin and spot markets.<\/p>\n\n\n\n<p>On Thursday, Binance told users that the Terra and Tether (USDT) trading pairs would be taken off the exchange if the price of Terra fell below $0.005.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\"><div class=\"wp-block-embed__wrapper\">\n<div class=\"embed-twitter\"><blockquote class=\"twitter-tweet\" data-width=\"550\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">Updates:<br>\ud83d\udd38Notice of removal of some margin and spot trading pairs at 12:40am UTC, May 13, 2022. <br>\ud83d\udd38Adjusting of tick size for spot trading pair at 12:40am UTC, May 13, 2022. <a href=\"https:\/\/t.co\/jijqNqaTdJ\" target=\"_blank\">https:\/\/t.co\/jijqNqaTdJ<span class=\"wpil-link-icon\" title=\"Link goes to external site.\" style=\"margin: 0 0 0 5px;\"><svg width=\"24\" height=\"24\" style=\"height:16px; width:16px; fill:#000000; stroke:#000000; display:inline-block;\" viewBox=\"0 0 24 24\" version=\"1.1\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" xmlns:svg=\"http:\/\/www.w3.org\/2000\/svg\"><g id=\"wpil-svg-outbound-7-icon-path\" fill=\"none\" clip-path=\"url(#clip0_31_188)\">\r\n                            <path d=\"M9.16724 14.8891L20.1672 3.88908\" stroke-linecap=\"round\"\/>\r\n                            <path d=\"M13.4497 3.53554L20.5208 3.53554L20.5208 10.6066\" stroke-linecap=\"round\" stroke-linejoin=\"round\"\/>\r\n                            <path d=\"M17.5 13.5L17.5 16.26C17.5 17.4179 17.5 17.9968 17.2675 18.4359C17.0799 18.7902 16.7902 19.0799 16.4359 19.2675C15.9968 19.5 15.4179 19.5 14.26 19.5L7.74 19.5C6.58213 19.5 6.0032 19.5 5.56414 19.2675C5.20983 19.0799 4.92007 18.7902 4.73247 18.4359C4.5 17.9968 4.5 17.4179 4.5 16.26L4.5 9.74C4.5 8.58213 4.5 8.0032 4.73247 7.56414C4.92007 7.20983 5.20982 6.92007 5.56414 6.73247C6.0032 6.5 6.58213 6.5 7.74 6.5L11 6.5\" stroke-linecap=\"round\"\/>\r\n                        <\/g>\r\n                        <defs>\r\n                            <clipPath id=\"clip0_31_188\">\r\n                                <rect fill=\"white\" height=\"24\" width=\"24\"\/>\r\n                            <\/clipPath>\r\n                        <\/defs><\/svg><\/span><\/a><\/p>&mdash; Binance (@binance) <a href=\"https:\/\/twitter.com\/binance\/status\/1524912364616699904?ref_src=twsrc%5Etfw\" target=\"_blank\" rel=\"noopener\">May 13, 2022<span class=\"wpil-link-icon\" title=\"Link goes to external site.\" style=\"margin: 0 0 0 5px;\"><svg width=\"24\" height=\"24\" style=\"height:16px; width:16px; fill:#000000; stroke:#000000; display:inline-block;\" viewBox=\"0 0 24 24\" version=\"1.1\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" xmlns:svg=\"http:\/\/www.w3.org\/2000\/svg\"><use href=\"#wpil-svg-outbound-7-icon-path\"><\/use><\/svg><\/span><\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/div>\n<\/div><figcaption>\u2014 Binance (@binance)&nbsp;<a href=\"https:\/\/twitter.com\/binance\/status\/1524912364616699904?ref_src=twsrc%5Etfw\" target=\"_blank\" rel=\"noreferrer noopener\">May 13, 2022<span class=\"wpil-link-icon\" title=\"Link goes to external site.\" style=\"margin: 0 0 0 5px;\"><svg width=\"24\" height=\"24\" style=\"height:16px; width:16px; fill:#000000; stroke:#000000; display:inline-block;\" viewBox=\"0 0 24 24\" version=\"1.1\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" xmlns:svg=\"http:\/\/www.w3.org\/2000\/svg\"><use href=\"#wpil-svg-outbound-7-icon-path\"><\/use><\/svg><\/span><\/a><\/figcaption><\/figure>\n\n\n\n<p>Earlier this week, Binance also temporarily stopped withdrawals of the stablecoin and Terra because of the high number of withdrawals that were still pending.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Following the recent update on the downfall of the LUNA price here are the reasons LUNA and UST Stablecoin fell to nearly zero According to data from CoinMarketCap, the price of Terra&#8217;s native governance and staking token, dropped 99.97% yesterday and is now trading at $0.00005395. What Is Behind LUNA, UST Fall In Price? 1. [&hellip;]<\/p>\n","protected":false},"author":29,"featured_media":26789,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,21],"tags":[],"class_list":["post-26774","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-breaking","category-news"],"jetpack_featured_media_url":"https:\/\/coinscreed.com\/staging\/wp-content\/uploads\/2022\/05\/LUNA-UST-Stablecoin-Sudden-Crash-Here-Is-Why.jpeg","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/coinscreed.com\/staging\/wp-json\/wp\/v2\/posts\/26774","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/coinscreed.com\/staging\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/coinscreed.com\/staging\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/coinscreed.com\/staging\/wp-json\/wp\/v2\/users\/29"}],"replies":[{"embeddable":true,"href":"https:\/\/coinscreed.com\/staging\/wp-json\/wp\/v2\/comments?post=26774"}],"version-history":[{"count":0,"href":"https:\/\/coinscreed.com\/staging\/wp-json\/wp\/v2\/posts\/26774\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/coinscreed.com\/staging\/wp-json\/wp\/v2\/media\/26789"}],"wp:attachment":[{"href":"https:\/\/coinscreed.com\/staging\/wp-json\/wp\/v2\/media?parent=26774"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/coinscreed.com\/staging\/wp-json\/wp\/v2\/categories?post=26774"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/coinscreed.com\/staging\/wp-json\/wp\/v2\/tags?post=26774"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}