Cryptocurrency

Luna’s catastrophic plunge doesn’t bode well for bitcoin

Russell Shor Written by Russell Shor


The LUNAUSD chart shows a waterfall effect, as the cryptocurrency capitulated from a high of $119.34 on 5 May 2022 to a paltry $2.69. This savage decline is a 97.75% loss of value, 96% coming in the last three days

Luna is the native token of the Terra blockchain protocol and was supposed to stabilise the price of the protocol's stablecoins via complex code. The point being that Terra's blockchain attempted to peg the stablecoin to the dollar. This absolute surrendering of value is akin to a bank run, and we may forgive one for arguing a failed experiment.

However, the failure here may have dire consequences for bitcoin. This is because Luna Foundation Guard (LFG), an organisation supporting Terra, holds billions in bitcoin. I.e. the odds are narrowing that LFG may need to dump these due to Luna's catastrophic decline.

Reference:
www.cnbc.com

Image by urformat from Pixabay

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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