Terra (luna) slumps 14% this week, here’s why

Do repost and rate:

Terra (LUNA), the native token on the eponymous blockchain, sank to an over one-month low this week as the release of 10 million tokens into circulating supply caused a price shock.

The token dropped 14% this week, and trading near a one-month low of $81.34. It is also one of the worst performing cryptocurrencies this week.

LUNA supply shock?

A bulk of the token’s losses stem from a donation of 10 million LUNA tokens to the Luna Foundation Guard (LFG). The donation was made by lead Terra developer Terraform Labs, and, is intended to be deployed towards bolstering the LFG’s stablecoin reserves.

LFG’s reserves, which back the stablecoin UST, are worth about $2.45 billion, of which nearly 70% is Bitcoin (BTC). The community recently applied the LUNA donation towards buying more BTC for the reserve.

But the 10 million tokens were also from Terraform’s non-circulating LUNA reserves. Their release into active, circulating supply had a deflationary effect on LUNA prices. The token’s price slid by over 6% in immediate reaction to the donation.

Trending Stories
Terra (LUNA) Slumps 14% This Week, Here's Why
Altcoin News
FTX conference features Bill Clinton, Tony Blair
Just-In: FTX Courts Big Political Figures For Upcoming Crypto Conference
Altcoin News
Just-In: Russia Set To Legalize Crypto, But There's A Catch
Altcoin News
SEC-VS-RIPPLE
Ripple Vs SEC: Regulator Tries To Delay Releasing Hinman Memos
Altcoin News
Demand For Bored Ape NFTs Skyrockets In 24 Hours, Here's Why
Altcoin News

LFG’s reserves are an attempt to lend UST further credibility as a completely decentralized algorithmic stablecoin. The reserves are set to act as a buffer for any extreme liquidity shocks.

But Terra’s heavy concentration of BTC in its reserves has drawn criticism, and also spurred some LUNA selling. BTC tends to log large price swings, making it unsuitable to use as a reserve currency.

Tracking BTC, the value of Terra’s reserves recently hit a one-month low.

Terra has more locked tokens than in circulation

LUNA has been criticized over the fact that its non-circulating supply, held by Terraform Labs, is far more than the token’s circulating supply. The release of these tokens could further rattle LUNA prices.

Data from Terra Analytics shows that 383 million LUNA tokens are locked, compared to 358 million tokens in circulation.

LUNA supply skewed towards locked tokens

Terraform, and the LFG have attempted to offset this supply difference by regularly burning LUNA to mint UST. The move is inflationary for the token’s prices, and also generates more of the stablecoin for circulation.

Prior to the donation, nearly 132 million tokens were burnt in LUNA’s lifetime. But the token is still prone to shocks if more LUNA is released from Terraform’s reserves.

  • Trending
  • Price Analysis
  • Terra (LUNA) Slumps 14% This Week, Here’s Why
  • Just-In: FTX Courts Big Political Figures For Upcoming Crypto Conference
  • Just-In: Russia Set To Legalize Crypto, But There’s A Catch
  • Ripple Vs SEC: Regulator Tries To Delay Releasing Hinman Memos
  • Demand For Bored Ape NFTs Skyrockets In 24 Hours, Here’s Why
  • Ripple Vs SEC: SEC Files Letter Saying It Is Satisfied With Discovery Phase
  • Will Elon Musk Accept Cardano (ADA) Founder’s “Alternative Twitter” Offer?
  • Cardano’s Vasil Hard Fork Expected In June; Here’s What To Expect
  • Why Robinhood CEO Believes Dogecoin Is Better Than US Dollar
  • Bitcoin Returns To $40,000 ; Here’s What Could Happen Next
  • Litecoin Price Prediction: LTC Price Set To Jump 16%; Are You Buying?
  • Cardano Price Prediction: ADA Price Remains Pressured Near 50-day EMA; Is $1.10 Possible?
  • Stellar Price Prediction XLM Is Set For $0.24 With An Inverted H&S Pattern
  • Ethereum Price Prediction: ETH Price Consolidates Near $3,000; Hold Or Exit?
  • Litecoin Price Prediction: LTC Price Entering Range-Bound Rally
  • WAVES Price Prediction: Hovers Near Monthly Support $20.0; Aims For $35.0 Next
  • Zilliqa Price Analysis: ZIL May Correct 15% Before Hitting The Next Support
  • Dogecoin Price Prediction: DOGE Price Set To Jump 30%; Time To Enter?
  • XRP Price Prediction: $0.785 Resistance Breakout Hints 15% Hike In XRP
  • Terra price Prediction: LUNA Price Challenges 0.50% Fibonacci Retracement Near $0.80; Hold or Exit?
Crypto StoriesView all
AMC Accepts Dogecoin And Shiba Inu
AMC Accepts Dogecoin And Shiba Inu
Wolf of Wall Street Jordan Belfort Is Now a Crypto Guru
Vlad-Tenev
Robinhood CEO Envisions DOGE As The Future Currency of Internet

Regulation and Society adoption

Ждем новостей

Нет новых страниц

Следующая новость