The investing world is taking a severe beating today. Especially in the crypto world, coins and tokens trading in the green are few and far between. This continues a series of bearish weeks for the asset class but with the added weight of another Federal Reserve rate hike on a tired market. Terra (LUNA-USD) is in a particularly bad spot. Recent blows to the network are adding insult to injury, dragging the Terra (LUNA) crypto down by more than 60%.
The Terra network was not off to a terrible start in 2022. Certainly, it suffered the same losses as the rest of the market during the January corrective period. But, it also saw an all-time high in the spring. These highs came as a result of much community activity; the Luna Foundation Guard (LFG) — a body that oversees the development of Terra — announced it would be purchasing $10 billion in Bitcoin (BTC-USD) to underlie the TerraUSD (UST-USD) stablecoin. The stablecoin had seen volatility itself, briefly losing its $1-pegged price point after a large outflow of users.
But the woes keep piling on once again, taking Terra (LUNA) crypto prices far from that $119 all-time high. UST suffered another price de-pegging yesterday, causing LUNA prices to plunge more than 11% in sympathy. In response, the LFG announced it would be using $750 million of its Bitcoin fund and $750 million UST to help stabilize the token. The UST is being used to buy more Bitcoin, while the Bitcoin is being lent to exchanges to stabilize UST prices.
The move had seemed to help, bringing UST close to its $1 value once again. But just as quickly as things sorted themselves out, they are falling apart once again. Some odd behind-the-scenes activity has sent UST back into a plunge, and LUNA with it.
Terra (LUNA) Crypto Tanks as UST Drops Below 70 Cents
Questions are arising around the Terra (LUNA) crypto and the UST stablecoin after some odd behavior last night. It looks as thought the LFG is moving around Bitcoin holdings, but nobody knows where it is going.
Indeed, after the Guard unloaded $1.5 billion in assets to secure the network, the governing body made another move. Specifically, the LFG wallet spent over 42,500 BTC in the hours following the fund deployment. This stash of coins was broken into two transactions: one chunk of 12,500 BTC was sent to the OKEX exchange, and the other 30,000 was sent to an unknown address.
Just after this transaction occurred, problems with the UST price became severe. In the early hours this morning, the token’s value crashed to 67 cents. Investors have become highly critical of the network; some say that the fiasco proves just how centralized Terra is, with the massive number of BTC being moved without explanation from LFG.
In the midst of the pandemonium, Terra (LUNA) crypto prices suffered their steepest losses of the year. Over the course of last night, prices sank from $59 to a low of $24, a near-60% decrease in a single day. The coin is down 65% on the week now. Trading volumes of the LUNA and UST cryptos are up massively, even as exchanges like Binance (BNB-USD) put holds on withdrawals of the currencies. More than $13 billion LUNA and $5 billion UST are swapping hands as investors continue to dump their holdings.
On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.