LUNA Crypto: Where Do Things Stand After Terra’s Stablecoin Failure?

  • Terra (LUNA-USD) developers are picking up the pieces after the network’s near total collapse last week
  • Community proposals are cropping up, aiming to right the ecosystem and allow LUNA to rebuild
  • The Luna Foundation Guard (LFG) is clarifying the state of its reserves, which are now nearly empty
Stacked Terra (LUNA) crypto tokens.
Source: David Sandron /

The last week in cryptocurrency is certainly going to be one for the history books. The LUNA crypto saw perhaps the most dramatic collapse ever, with prices plummeting nearly 100%. The coin serves as a bleak reminder of just how quickly projects can turn sour.

But developers are not giving up yet: The project’s leads are turning to community proposals once again to right the wrongs that led to this point. Moreover, they are providing updates on LFG’s crypto reserves.

To quickly recap, Terra fell apart last week after its stablecoin TerraUSD (UST-USD) lost its $1 peg. The algorithmic stablecoin is supposed to automatically fluctuate in supply as a way to keep prices at $1. Unfortunately, this did not work, and UST prices spiraled. This in turn affects LUNA, since it is an integral part of the UST algorithm and the main token on the Terra network. The de-pegging turned into a rapid plunge for both coins. As it stands now, UST is trading at about 10 cents and LUNA dropped from nearly $80 to less than a half of 1 cent.

LUNA Crypto Turnaround Plans Heat Up

In the wake of the disaster, users have lots of questions. Most notably, they want to know what happened to the billions of dollars worth of crypto assets in the LFG’s reserve wallet. They also want to know what’s next for the LUNA crypto. Luckily, they are getting at least some answers this week.

The LFG, an organization that oversees development of the Terra network, posted a Twitter thread this morning detailing its reserve balance. This reserve, which cropped up in early 2022 after a separate UST de-pegging, is comprised of billions of dollars in assets. It includes a stash of over 80,000 Bitcoin (BTC-USD). Accumulated for the purpose of deploying in case of emergency, developers seem to have put nearly the entire portfolio into action to little effect.

According to this report, the LFG deployed over 99% of its Bitcoin, a stash of 80,394. 46,876 BTC went to a “professional market maker.” This market maker then deployed the Bitcoin on behalf of LFG to buy up UST. The LFG sold another 33,206 Bitcoin to buy even more UST later last week, bringing total BTC reserves to just 313.

Thanks to this data, we can see just how many resources the LFG threw at the LUNA crypto. Interestingly enough, the reserve also holds large amounts of Binance (BNB-USD) and Avalanche (AVAX-USD). It did not sell any of these BNB or AVAX holdings.

Last week, the price of AVAX fell steeply as investors anticipated a dump of the $100 million stash the LFG held.

What’s Next for LUNA? Developers Prepare to Reimburse Holders.

In the wake of the meltdown, it seems that developers are going to put the most affected LUNA crypto holders at the forefront of the rebuild. The LFG is going to compensate small holders after their investments shrank to nearly $0.

Alongside its reserves report, Terra developers say they are working on a plan to redistribute the remaining LFG funds to users, from smallest wallets upward. It does not yet have a detailed plan in the works for how this reimbursement will occur.

Moreover, founder Do Kwon revealed plans to rebuild Terra through his “Terra Revival Plan.” This plan includes a massive redistribution of tokens as well as a community pool which will fund further Terra development.

It will be interesting to watch the network rebuild from this point forward.

On the date of publication, Brenden Rearick did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Brenden Rearick is a Financial News Writer for InvestorPlace’s Today’s Market team. He mainly covers digital assets and tech stocks, with a focus on crypto regulation and DeFi.

Article printed from InvestorPlace Media,

©2022 InvestorPlace Media, LLC