The recovery of Terra Luna has been a major event since July, after the Terra Luna crash in May sent the industry a numbing shock. So today we will discuss whether Luna will recover or not and why did Luna crash. Let’s find out by reading the article below.
Why did Luna crash?
Before LUNA crashed, about $2 billion worth of UST in the anchor protocol was unstaked, and sold for hundreds of millions of dollars immediately afterwards. It's unclear why anyone would take this action, but some suspect it's a malicious attack on the Terra ecosystem. This massive sell-off pushed the price of UST down to 0.91 cents. So people started buying LUNA.
At the same time, however, the entire crypto market was experiencing a major crash, causing the price of LUNA to plummet. So far, the market value of LUNA has fallen below UST. This is a problem because UST is algorithmically tied to LUNA for stability. As a result, UST is unpegged because the total value of UST cannot be exchanged for LUNA. All of this happened in such a short period of time that the algorithm that maintained the value of UST at $1 failed to maintain the price of the stablecoin. Investors sold all their holdings on the open market as the prices of UST and Luna simultaneously started to plummet. Significant increase in supply of LUNA on the crypto market and decoupling of UST finally insane.
Will Luna recover?
The only way for the LUNA price to return to anything close to its previous high of over $100 is to burn a significant amount of the circulating supply of LUNA from today's 6.5 trillion, back to around 350 million before the crash. This will be no easy feat - it was announced as part of the LUNA and UST recovery plans, but it remains to be seen if it will come to fruition. Another question is whether the cryptocurrency will recover – Bitcoin has stabilized around $30,000 but has yet to break to the upside or close above the daily EMA 8.
Even a recovery to $1 would be mathematically impossible if the Terra supply hadn't been burned. In November 2021, the entire cryptocurrency market cap peaked at $3 trillion when Bitcoin was over $69,000 and Ethereum was over $4,800.
If the price of LUNA is $1 per coin and the supply is $6.5 trillion, then the market cap of LUNA would be $6.5 trillion, twice the valuation of all cryptocurrencies and at an all-time high. Bitcoin's market cap is about $570 billion today - LUNA market cap would even flip Bitcoin before LUNA price hits $0.09. No cryptocurrency has ever toppled Bitcoin.
LUNA will flip Ethereum for about 4 cents - $0.04, which is also unlikely because there is so much DeFi running on ETH. Can Luna recover? Based on token economics until the circulating supply is reduced. Or until the market capitalization of the entire cryptocurrency $1.27 trillion today increases. Cryptocurrencies are undervalued compared to gold with an $11 trillion market cap. Tyler and Cameron Winklevoss predict that crypto could replace gold as a store of value in the coming years.
I hope this article will help you to learn whether Luna will recover or not and why did Luna crash. Currently, the only thing controlling the community is providing more use cases. This is a work in progress and the community is moving very slowly.
