As I'm sure, most of you are probably wondering just what happened? We started the week in the 80's and now we're sitting at a literal $0. It's not everyday that you see this. But then again it's not everyday you see the market get hit like a few bowling pins round after round tumbling down harder with each and every hit.
Explanation.
Terra
Trading at 1 cent now versus nearly $80 a week ago Terra has tumbled and been hit significantly harder than any other crypto's in the sector during this massive ripple the crypto/Index market has been hit with as inflation, Fed rates, and economic woes, worries and Russia's ongoing invasion of Ukraine seeming to have no end in near sight.
The Market
It definitely doesn't help that the S&P 500 Index alone has fallen 18% already within the first 90 days with the benchmark signifying it's second worst start to year. The Dow Jones Industrial Average fell 1.5% or 550 point leading it on track to close out the sixth-straight losing day while the Nasdaq composite shed 2%. With the Fed trying to intervene and rein in rising price levels via monetary tightening and increasing the interest rates the grind lower day by day is making it harder for the Fed to step in and tighten it's control over inflation without pushing the economy into a recession.
Rate Hike
Word around is also that the next two fed meetings may consist of 50 point hikes for both resulting in even higher interest which without a doubt won't help to settle or sooth out investor sentiment with things already looking muddy. In the long run it'll help, but right now it hasn't helped us at all.
Terra Stops
Terra
After Terra's stable coin 'UST' lost it's U.S dollar peg earlier this week the firm's crypto LUNA fell into freefall faster than a ships anchor can hit the ocean's floor. After nearly shedding 100% of it's value today alone validators announced they would halt the blockchain to prevent governance attacks. Governance tokens are tokens that can have votes proposed and made, voting power is concentrated based on how much tokens you own so as you can imagine when you get to those low market cap numbers it makes it much easier for whales to form a governance attack by making proposals, and approving them using their large holdings as the leverage to approve it which of course opens the path to a lot of manipulation and could even have crippled the crypto had a governance attack taken place. This is one of the big risk with Governance tokens as they can be attacked during these perilous market moments. Thanks to how dramatically quick the price of the governance token fell, the blockchain network became much more susceptible to attackers rapidly.
Explanation.
Terra
Trading at 1 cent now versus nearly $80 a week ago Terra has tumbled and been hit significantly harder than any other crypto's in the sector during this massive ripple the crypto/Index market has been hit with as inflation, Fed rates, and economic woes, worries and Russia's ongoing invasion of Ukraine seeming to have no end in near sight.
The Market
It definitely doesn't help that the S&P 500 Index alone has fallen 18% already within the first 90 days with the benchmark signifying it's second worst start to year. The Dow Jones Industrial Average fell 1.5% or 550 point leading it on track to close out the sixth-straight losing day while the Nasdaq composite shed 2%. With the Fed trying to intervene and rein in rising price levels via monetary tightening and increasing the interest rates the grind lower day by day is making it harder for the Fed to step in and tighten it's control over inflation without pushing the economy into a recession.
Rate Hike
Word around is also that the next two fed meetings may consist of 50 point hikes for both resulting in even higher interest which without a doubt won't help to settle or sooth out investor sentiment with things already looking muddy. In the long run it'll help, but right now it hasn't helped us at all.
Terra Stops
- Terra validators opted to halt the blockchain network following the week's collapse of USTUSDT dragging LUNA down with it.
- Validators also plan to restart the network after a patch is applied with will help them avoid any more potential attacks.
Terra
After Terra's stable coin 'UST' lost it's U.S dollar peg earlier this week the firm's crypto LUNA fell into freefall faster than a ships anchor can hit the ocean's floor. After nearly shedding 100% of it's value today alone validators announced they would halt the blockchain to prevent governance attacks. Governance tokens are tokens that can have votes proposed and made, voting power is concentrated based on how much tokens you own so as you can imagine when you get to those low market cap numbers it makes it much easier for whales to form a governance attack by making proposals, and approving them using their large holdings as the leverage to approve it which of course opens the path to a lot of manipulation and could even have crippled the crypto had a governance attack taken place. This is one of the big risk with Governance tokens as they can be attacked during these perilous market moments. Thanks to how dramatically quick the price of the governance token fell, the blockchain network became much more susceptible to attackers rapidly.
- Terra noted that it would only be a temporary outage and that Validators were applying a patch to disable further delegations, proposals to prevent any governance attacks and that they would coordinate to restart the network. And for the record the Terra blockchain was officially halted at the block height of 7603700.
Luna's burning system
Basically LUNA acts as an arbitrage cushion for UST in order to help keep its dollar peg. Investors can always swap one UST for $1 of LUNA and vice versa. If UST falls below $1, investors can buy the discounted token, swap it for $1 in LUNA and then sell the newly-minted LUNA on the market for a profit. Each time this swap is made, the sold-token is burned (crypto language for destroyed).
Recovery Plan?
Terra's creators of LUNA and UST also unveiled a series of steps which will be aimed at salvaging the Terra ecosystem following the collapse of both coins this week. Terra Labs noted that any UST remaining in the community pool, running on Ethereum would be burned an that $240 million worth of LUNA would be staked to avoid any potential governance attacks. The move to halt the blockchain is designed to avoid such attacks before any could occur. The crypto industry as well as insiders have widely criticized the move of course as their plan essentially is to let hyperinflation of Luna dissolve the bad UST debt they now have going on however LUNA's chain security goes down as the hyperinflation reduces it's price. It makes some wonder, "Is the chain not even safe enough to continue the recovery plan?
SEC
As if the week hadn't been rough enough for Terra Labs the SEC is already investigating into this week's events surrounding LUNA as well as Terra's UST. Although the question remains as to whether or not UST or stable coins are securities the events of that have unfolded this week grant enough jurisdiction to the SEC to investigate and bring things under the SEC's purview.
Final Note
It remains to be seen on whether or not these measures will save UST's peg or LUNA following this week's dramatic fall. But one way or another this outcome will have a significant impact on the Crypto sector as LUNA's UST was seen as one of the best and most prime examples of a crypto's stable coin sitting alongside USDT. If UST and LUNA fail to recover it will be very hard for anyone else let alone new investors to Trust any crypto projects including even BTC being as this project was suppose to be one of the best and safest in the space. It could also open up to ripple effects with large selling volume following in other stable coins from USDT to USDC and BUSD. USDT has already fallen below $1 this week signifying that even the biggest stable coin isn't so 'stable.' We can't make any predictions or guesses at this point honestly being as just how crazy this week has been for everything with us seeing events and actions take place that we've never seen before. But honestly I don't think this is the end for LUNA or UST, but if it does end up happening and failing, then it'll no doubt have a ripple effect on the market and substantially contribute to investor confidence in crypto crypto projects being significantly lowered.
Without any delay I hope you guys have a great day and stay safe! Please be sure to leave a like and follow or even share, it's always appreciated and I simply give my best every Idea so thank you anyways again and wow, it has definitely been a hell of a week in the least to say.
~ Rock
