South Korean Exchanges Warn LUNA Investors as UST Collapse Mirrors TITAN Saga

After a dramatic 90% market crash, LUNA, buying and selling beneath $5, is now deemed a “cautionary item” by the favored South Korean cryptocurrency change UpBit.

Investors are unnerved after the embattled crypto project – Terra’s flagship stablecoin UST – lost its peg with the US Dollar.

Additionally, Bithumb additionally issued a warning to its buyers whereas coping with LUNA. In a bid to guard shoppers, the change designated the cryptocurrency as an “Investment Warning Item.”

LUNA’s Fate Hangs in Limbo

According to the crypto analytic platform, IntoTheBlock, the variety of transactions reached a brand new excessive, representing an enormous 13x improve towards the earlier two days as buyers proceed to hurry to promote their UST positions. What does this imply for LUNA?

André Nakano de Melo, the CEO of TITANDAO, highlighted the present drawback with UST and LUNA, which is that merchants need to get each the tokens out of the exchanges “so they can exploit the arbitrage opportunity by redeeming UST for LUNA.” He additionally went on so as to add that “exchanges need to stop the outflows as they might not have enough tokens (UST and LUNA) for all traders that want to withdraw.”

While talking with CryptoPotato, the CEO mentioned,

“The cold storage of tokens on exchanges does not imply they actually have all tokens for redemption. It is like a bank: we see a digit in our bank account, but if everyone decides to go and withdraw the money on the same day like in a bank run, the bank cannot provide all the physical cash needed.”

Is LUNA Following the Destructive Path of IRON?

Terra’s debacle mirrors that of TITAN final summer time when a token backing up the stablecoin IRON, known as TITAN, dropped to zero as uncertainty choked the market. It went on to be identified as the world’s first large-scale crypto financial institution run. Investors rushed to redeem IRON shortly after the peg of IRON to USDC broke. This triggered a demise spiral in TITAN’s worth, which was used as collateral to mint the stablecoin.

The collateral harm on LUNA for UST’s important deviation was epic. According to Melo, LUNA is following the same demise spiral as TITAN. He mentioned,

“UST was trading at close to $0.2 today, so confidence will be hard to regain. I do believe LUNA will eventually go even further down as IRON stablecoin was backed by $0.75 USDC while UST is only backed by LUNA. There is not too big to fail in crypto.”

At instances of market stress such as this, it stays to be seen if LUNA manages to show its viability.

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