Terra (LUNA) Futures Sees $106 Million in Liquidations as UST Falls to $0.35

Even when the tokens sank yesterday, 58 percent of LUNA dealers were betting on higher values.

Did you know that in January 2022, LUNA was trading at roughly a hundred times greater than it was the previous year, January 2021, despite market conditions? However, that awful wonderland rug pulls brought down the price.

At the time of writing, $387 million in open interest – or the number of unsettled futures contracts – remained, implying that additional liquidations or dramatic price action might be on the way as traders take gains or seek liquidation.

UST and other algorithmic stablecoins are backed by a basket of assets, including LUNA and bitcoin (BTC), without relying on a centralized third party to retain those assets. UST, on the other hand, has lost its peg this week, falling as low as $0.66 on Monday night before recovering to $0.90 on Tuesday.

In terms of healing, Wednesday was not as nice. The stablecoin UST slipped below $0.35 this morning as the trading mood declined. Despite the Luna Foundation Guard (LFG), a non-profit established earlier this year to preserve a reserve backing for LUNA, liquidating its bitcoin assets in an attempt to save UST’s peg, this was the case.

LUNA’s collapse was one of the most precipitous in the history of major cryptocurrency. The altcoin Prices have dropped by 95% in the last 24 hours, as traders priced in contagion risks to the LUNA tokens after TerraUSD (UST), the platform stablecoin that was tied to US dollars earlier this week, lost its peg.

Part of LUNA’s drop was due to parent company Terra issuing more tokens to sell on the open market and raise funds to support UST. LUNA may be traded for precisely 1 UST or vice versa. The extra supply might have led to LUNA’s massive price drop during the last 24 hours.

UST should stay at $1 as a stablecoin, but there’s more to this coin than that. It’s possible. Keep in mind that as a stablecoin, it is intended to serve as a value store rather than an investment.

Anshul Dhir, COO, and co-founder and EasyFi Network told business today that investors need to exercise caution when it comes to investing in algorithmic stablecoins,

“There is an intrinsic risk associated with algorithmic stablecoin, anyone who invests or has invested in them should not blame the project founders or the industry.

The risks associated with such experiments need to be understood before putting your money in them. The risk lies not just with the founders when it comes to such experiments, but also with every user who partakes in the project”