Market Bleeds As LUNA Nears $0

Worth $119.22 at its peak, LUNA
LUNA
, the sister asset of troubled cryptocurrency TerraUSD
UST
, collapsed to almost $0 overnight.

As of 10:45 a.m. ET, the token is trading at $0.005 with a market capitalization of $56 million, according to CoinMarketCap—a dramatic fall from $28 billion just a week ago. TerraUSD (UST), designed as an algorithmic stablecoin that should always be worth $1, lost its peg to the U.S. dollar last week, dropping to as low as 36 cents. It is currently worth $0.39.

Investors’ loss of confidence appears to have triggered a series of further withdrawals from the Anchor Protocol, a lending market that offered yields as high as 20% to users who deposit UST. Since Friday, Anchor’s total deposits have fallen from $14 billion to $2.2 billion. To stop “the depeg death spiral”, the protocol’s contributors proposed to cut interest rates to a target of 4%.

Among other measures, Terra developers offered to “burn”, or take out of circulation, nearly 1 billion UST while increasing the amount of available LUNA, which acts as a stabilizing mechanism to help return the price of UST back to $1 when it deviates, to alleviate the pressure. Meanwhile, the supply of LUNA has shot up by 20-fold today to hit $25 billion (The drop in UST’s price caused additional LUNA to be minted and issued into the open market).

Additionally, the world’s largest stablecoin and a centerpiece of global cryptocurrency trade, Tether
USDT
, which unlike Terra claims to back its tokens with actual dollar reserves, also slipped away from its $1 peg on Thursday.

The cryptocurrency market has shed another 11% off its market capitalization, which now sits at $1.2 trillion, as traders have lost nearly $1 billion to liquidations over the past 24 hours, according to data from Coinglass. The largest cryptocurrencies by market share, bitcoin and ether, are trading at $29,346 and $1,999 respectively.

“Calling the bottom of this bear market is impossible, and I wouldn’t trust anyone who claims to be able to predict the future,” says Derek Lim, head of crypto insights at cryptocurrency exchange Bybit. “However, if we look at previous data, even during the worst market crashes Bitcoin
BTC
BTC
has found support at the 200-week simple moving average (SMA), which is currently at just over $21,000, and this is a good indicator for what could be a worst-case scenario.”