LUNA Holders and Stakers Incur Heavy Losses As Token Price Falls 90% In 24 Hours

Ethereum World News
Ethereum World News May 11, 2022
Updated 2022/05/11 at 6:12 PM
4 Min Read
  • Stakers are left stranded as LUNA’s crash continues
  • Unstaking coins takes around 3 weeks on Terra
  • Terra’s native token is now over 95% down from its $120 all-time high in April 2022
  • UST is still massively depegged from the US Dollar
  • Despite CEO Do Kwon’s latest recovery plan, sentiment in the market remains uncertain.

Over $1.2 billion liquidation calls were recorded in the crypto market over the past 48 hours as Bitcoin slipped below $31,000 and Ethereum dropped below $2300. The total market cap has fallen over 20% since May 4, 2022, as over $400 billion was wiped from the market.

The last time the total crypto market cap hit these lows was back in July 2021, almost a year ago.

While a majority of the market is currently on the downtrend, the focus is arguably not on the usual suspects like Bitcoin and Ethereum. Instead, Terra’s LUNA and UST have all but monopolized headlines as both tokens have experienced significant crashes over the past few hours.

LUNA Stakers Left Without Relief As Price Fall Rages On

Back in March 2022, LUNA emerged as the second most staked token in crypto per data from StakingRewards.com. However, things quickly turned barely over a month later as Terra’s UST stablecoin lost its peg to the US Dollar.

Unlike traditional stablecoins like USDT and USDC, UST is an algorithmic token backed by digital asset reserves. The coin is also linked to LUNA through a mechanism that’s designed to help UST maintain its dollar peg.

In the event of a slight depeg, UST holders can redeem their tokens and exchange 1 UST to mint $1 worth of LUNA. However, this strategy could have contributed to the ongoing tumble experienced by both protocols.

After UST depegged, the price of both coins started dumping. Holders of Terra’s stablecoin started minting massive amounts of LUNA in a bid to mitigate their losses. This oversaturated the market with tokens and further incentivized huge dumps of the coin.

Unlike spot trades, stakers lock up their tokens for a period of time and earn tokens or yields in return. In the case of Terra’s governance token, stakers must wait 21 days before their coins get unstaked and they can sell should they wish.

Considering current market climates, this presents a key problem for LUNA stakers are the losses incurred after the 21-day period could be significant. Data from Terra Analytics shows that over 25% of LUNA’s circulating supply, around 150 Million coins, is currently locked up in staking.

While the price of LUNA is experiencing a slight recovery as of press time, the token remains over 90% down from all-time highs and UST has not yet regained its dollar peg.

LUNA Holders and Stakers Incur Heavy Losses As Token Price Falls 90% In 24 Hours 1
LUNA Price Chart (Source: TradingView)
LUNA Holders and Stakers Incur Heavy Losses As Token Price Falls 90% In 24 Hours 2
UST Stablecoin Price Chart (Source:TradingView)

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