Terra is a cryptocurrency project that is represented by the LUNA token. The ecosystem has a stable coin pegged to the US Dollar with the ticket UST. The “peg” to the US Dollar is performed with an algorithm that encourages the burning of LUNA to buy UST when the peg is below $1.00 and the burning of UST and converting back to LUNA when the peg is above $1.00. In addition to LUNA and UST, there is a staking platform called Anchor that was yielding 20% on staked UST.
What happened?
According to a tweet from Charles Hoskinson, founder of Cardano, a group from Citadel and Blackrock conspired to attack the Terra ecosystem including their staking platform on Anchor. Here’s the tweet from Charles:
Source: https://twitter.com/IOHK_Charles/status/1524384330088423425?s=20&t=2ALy7IwJ4i685JF3m2zKPQ
What is next?
Do Kwon, the founder of Terra, is active on Twitter and is working on bringing more liquidity into the ecosystem. The challenge is cryptocurrencies are a risk-on asset and are under significant pricing pressures to the downside as the Fed continues to raise interest rates. The recent CPI for April was higher than expected so continued rate hikes are in the cards. This will be a significant impediment to raising additional capital.
Assuming capital flows back into this ecosystem, prices will recover. If capital is too slow in coming, this could all end up in the dust bin of crypto.
If you are a holder on LUNA, UST, or have assets on Anchor, my most sincere wishes of healing and recovery. Remember health, family, and friends come before money. A vibrant community of “LUNAtics” benefits the entire cryptocurrency economy. We are still in the early stages of the adoption of cryptocurrency and blockchain technology and there is still time to build up your “crypto bags”.
What is next for bitcoin?
The market dominance metric that compares the market cap of bitcoin versus the entire market has been hovering around the 40% level. I expect this to increase as holders flee the altcoins and stable coins and move their proceeds into bitcoin. Ethereum may also benefit from this altcoin exodus and surpass the 30% level where it peaked in 2017.
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Author: Stephen Stubblefield, SANCTUARY DEX™ Technical Advisor