Terra LUNA slumped by 98%, more than 200 billion market value has evaporated! Bitcoin slumped by more than 10%, with 172806 people suffering great loss in nearly 24 hours. What’s happened?

More than 200 billion yuan of market value of Terra LUNA has evaporated

According to the official Public Wechat Account of e company in securities times on May 12, after two consecutive days of sharp decline, the price of the cryptocurrency Terra LUNA once fell below 2 US dollars, and its market value once fell to 1.1 billion dollars. While UST fell below 0.21 dollars at the lowest level, making it seriously decoupled from the US dollar, falling 98%.

As the third largest stable currency in the cryptocurrency market, UST has maintained its price around 1 dollar previously. But since May 10, UST has also slumped, which completely changed its “stable currency” attribute.

Previously, Luna, once known as “Maotai Coin” by coin circle players, also slumped recently. It had ever soared all the way from the lowest point of 0.12 dollar to 119.5 dollars, and had ever reached the highest market value of 41 billion (about more than 270 billion yuan).

Among cryptocurrencies, LUNA once ranked fifth in terms of its circulation market value of the whole field.

According to the introduction, Terra is an currency platform with stable currency, which runs on the Proof of Stake (POS) built by Tendermint, and is the bottom layer of the equity proof blockchain. LUNA is the token of Terra, which is used for the issuance of the stable coin TerraSRDs, price stabilization mechanism, as well as the network governance. Users can use LUNA tokens to exchange for TerraSRDs stable coins and vice versa. Under such circumstance, the stability of the price of the  currency is guaranteed.

LUNA is the mining coin of Terra DPoS blockchain, and Terra is supported by Luna. Therefore, miners provide stability and safety. In the exchange, the agreement relies on transaction fees and Seigniorage to provide stable mining incentives under all economic conditions.

According to its operation mechanism, when the market demand for UST increases and the price is higher than 1 dollar, users can send away 1 LUNA (LUNA is burned) to the system and exchange it for one UST (UST is made) simultaneously. On the contrary, when the demand for UST decreases and the price falls below 1, users can send away 1 (UST is burned) dollar to the system in exchange for 1 LUNA (LUNA is made), so as to reduce the market supply of UST, and restore the anchoring relationship between UST and the US dollar.

According to the Beijing business daily, Jiang Zhaosheng, a senior researcher of Ouke cloud Chain Research Institute, pointed out that the sharp fluctuation of LUNA price was mainly because of the anchor breaking of the algorithm stable currency UST price. Combining the impact of external factors including the sharp decline of US stocks, the mood of panic arouse in the whole encryption market, making LUNA under greater sales pressure, and its price began to fluctuate violently.

Bitcoin once fell by more than 10%, and 2.932 billion yuan evaporated in nearly 24 hours

In addition, it is worth noting that during the North American trading session on May 11, bitcoin fell by more than 10% and went lower than $28000 per coin during the session.

Other cryptocurrencies have also declined. As is vividly shown in some public data, cryptocurrencies continued to decline, with $462 million funds wiped out in the past 24 hours, and 172806 people suffered from great loss in the past 24 hours.

According to market participants, the reason why bitcoin continued to decline recently, was mainly due to the US interest rate hike and table contraction. In the past two years, some traditional financial institutions have entered the bitcoin market, and they only regarded bitcoin as an asset that can be configured. When there are bad trend in the global financial market, these funds will throw out bitcoin, resulting the bitcoin market to follow the trend of the US stock market.

According to the latest data from Glassnode, a blockchain analysis company, as traders fled speculative assets, the price of Bitcoin fell by more than 50% compared to its peak value of last year.