• Terra Luna price dropped on the back of Terra losing its peg to the US dollar.
  • LUNA price looks dead and gone as in the aftermath, its founder could be arrested anytime soon.
  • With the dented image and lost trust from investors, a turnaround looks unlikely.

Terra Luna (LUNA) price has turned into a cryptocurrency zombie. The price action shows no heartbeat or vital signs after its sharp decline in the spillover effect from its affiliate and stable coin Terra. Stablecoins are pegged against an asset and try to remain at the same level as parking space when pulling funds out of cryptocurrencies but not wanting to go into monetary cash. With the break of the peg, questions are raised, and cryptocurrency regulations have been put back on the top of the agenda for central banks and authorities.

LUNA price is soon to be forgotten

Terra Luna price has been decimated and blown to smithereens in the spillover of its stable coin Terra. That last one, Terra, is pegged against the dollar's value and is, via an algorithm, kept at parity to park your cryptocurrencies in a safe space digitally without having to transfer them at the cost of exchange rates towards your normal day-to-day bank account. But there is where it goes wrong, as a peg is costly, and it could even push a small country into default by doing so, let alone a tiny alt-currency in the cryptocurrency space.

LUNA price dropped even below the value of a penny stock after the peg between Terra and the US dollar broke as the dollar strength demanded too many additional assets from the company behind Terra to match the dollar's appreciation. In several interviews, no comments or details were given on which assets the company was holding and buying to match the intrinsic value. This puts the whole $180 billion industry of altcoins at risk, as they are not regulated and thus not supported by any central bank, with former FED chair Yellen already commenting that this case illustrates that risk is exponentially growing as the product itself is growing without a set of parameters to move in.

LUNA/USD weekly chart

LUNA/USD weekly chart

In its brief existence in the alt-space, LUNA will probably contribute to the fact that cryptocurrencies will get a set of guidelines and rules applied to survive the woes and moves in global markets. A pegged currency is always tricky as it almost triggered Singapore into default a few years ago as the country tried to keep its currency at the same level against the dollar, and several other big central banks have in the past let lose their caps or floors as being unsustainable to maintain and being very expensive with often a big write off for the central bank involved. The best example is when the Swiss Central Bank let go of its floor unannounced and almost made the forex market crash with some currency pairs illiquid. Back then, other central banks stepped in to provide liquidity to defend the system from crashing, but who will step in if that happens with a cryptocurrency or stable coin pair?

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Coinbase’s new SOL staking program won’t save Solana price from this brutal outlook

Coinbase’s new SOL staking program won’t save Solana price from this brutal outlook

Solana price is lacking bullish momentum, which has led to a huge correction. This pullback comes after an impressive recovery rally seen across the entire crypto space. 

More Solana News

Why short-sellers are moving to trade Ethereum price

Why short-sellers are moving to trade Ethereum price

Ethereum price faced rejection after failed attempts to move past a significantly important resistance barrier. This development has led to ETH reversing the trend and returning to a stable support level, which will now decide the fate of the smart contract token.

More Ethereum News

North Korea's Lazarus Group suspected of hacking another top tier cryptocurrency project

North Korea's Lazarus Group suspected of hacking another top tier cryptocurrency project

Blockchain analytics firm Elliptic has found a strong connection between North Korea’s Lazarus Group and the $100 million crypto hack on Harmony’s Horizon Bridge.

More Cryptocurrencies News

Dogecoin price is primed for a significant movement

Dogecoin price is primed for a significant movement

A brief technical and on-chain analysis on Dogecoin price. Here, FXStreet's analysts evaluate where DOGE could be heading next.

More Dogecoin News

Bitcoin: Everything you need to know about BTC 200-week MA

Bitcoin: Everything you need to know about BTC 200-week MA

Bitcoin price has gone through turbulent times over the last few months. From reaching a new all-time high to hitting yearly lows and revisiting levels since 2020, the crypto markets have been extremely volatile.

Read full analysis

BTC

ETH

XRP