The world of cryptocurrencies has been witnessing its digital assets striding to the limelight. As folks from the business pin hawkish sight on prominent crypto assets. One amongst the many, is Terra, which has been in the talks of the business, of late. This time around, investors holding onto LUNA fear the possibility of an incoming dump.
Successively, the anxiety around LUNA’s price dump, creeps in as Terra faces criticism around bank run and UST de-peg event. In the interim, a proponent from the industry enlightens on the implications of UST on Terra (LUNA). Whilst clarifying the criticism around the digital asset.
Will UST Be The Rationale Behind Terra (LUNA)’s Plunge?
A proponent from the crypto town cites that, until the recent BTC raise by Luna Foundation Guard. UST was an “Algorithmic Stablecoin”, meaning the backing was done by endogenous collateral, which is LUNA. Since these stablecoins don;t need external collateral, these coins are more capital efficient, and can grow faster than debt-based rivals.
That said, these are prone to risks, which are known as death-spiral, that holds two possible scenarios. In the first, when LUNA loses value, bank run on UST which leads to an increase in mints of LUNA. That further aggravates LUNA’s value. In the second scenario, When UST supply contracts, bank run on UST that leads to more LUNA mints.
Conversely, the protagonist says the utility built for UST by Terra, whilst acting as a demand floor for UST. Helps negate some of the reflexivity of the death-spiral. He believes it to become far more resilient with faster growth, as it moves to exogenous collateral. The collateral ebbs the death-spiral by enabling UST redemptions to BTC, relieving LUNA’s price pressure.
LUNA Price To Embark A Slide?
LUNA price at the time of press is changing hands at $84.07 with gains being negative by 5.8%. Whilst the market cap is hovering around $30,713,543,395. The volume of trades around the clock is at $2,080,330,610. The price of LUNA has been ranging in the 24-hour bandwidth from the lows of $82.96 to the highs of $89.83.
The negative sentiments of investors and merchants around LUNA, has been reflecting on its volumes. A continuation in bearish sentiments, could drag the price down to its psychological barrier at $80. Which could make way for the price to breach levels of $75. That goes inline with the expectations of analysts who opine it to break down the parallel channel.
Summing up, we can expect the price of the digital asset to follow up with the turbulence in sentiments. While the tail risks cannot be ruled out. The positive side holds, the multi-trillion dollar future prospects of algorithmic stable coins, and growing UST supply. Conversely, Terra also plans to obtain $10 B in BTC reserves, which would empower a new era of Bitcoin standard.