The Fall of Luna. What's up with the market?
I want to share with you my thoughts on what is happening with Luna. Let's go back a little bit in chronology.
On May 5, $LUNA is worth $85 and their $UST Stablecoin is doing great, people believe in it and keep their money in it. Everyone loves the moon, because it's the same asset that was rising when everything was falling. After 4 days, the moon starts to actively decline with all the crypto amidst all the negativity hanging in the air.
To further understand, it is important to know that Luna has its own UST stabelcoin, which, unlike other stables, is backed by BTC, not dollars. (A round of applause for Luna's financiers.) And because Luna was buying about $1.6 billion worth of BTC (40,000 BTC) to keep its stabler at $40,000+ levels, when it falls below that price the stabler itself ceases to be it and flies down.
On the background of the general fall, the Moon decided to "save" their stack somehow, and they transfer their 20,000 BTC to OTC company to sell it and not to pour liquidity into the cup, and the rest 20,000 to OKX to pawn it. These solutions restore the rate a little, but after that it still collapses, because they do not have enough collateral for their stack because of the fall. Then the developers start looking for money and seem to find another 2 billion from the funds secured by their token $LUNA with a 2 year lock to rebuild the stack, but the funds haven't started investing to them yet. At the same time, the U.S. Treasury Secretary is making a statement that all stablility needs to be regulated and we all understand why she is saying this now. The negative backdrop is thickening over UST even more.
Even more selling pressure is being created by Kwon himself on Twitter when he talks about restoring the stabl. Seems like a good thing, but no. They've decided to shave the nation even more. Start burning $UST to restore the rate and print $LUNA, yes, so more people can buy it and thereby increase the interest on steak bounty, provoking steak lovers to carry their money.
This hasn't happened yet. The crypto market is young and hasn't seen problems like this. No one knows how it will handle it. Free money because of Covid, rising inflation, war, and a bunch of other circumstances that affect the market terribly.
I personally would compare this situation to the Great Depression in the US, probably even worse. I don't want to catch up, but the modern world has never faced what is happening now.
The market doesn't like uncertainty about tomorrow, and it is the lack of faith now that is creating unnecessary panic. After the flash crash of the moon, the crypto market will no longer be the same, it is divided into before and after. You're probably thinking "Why, it's just an altcoin." Yes and no. Luna was in the top 7 by capitalization 1 week ago, and at the time of writing this post it's already in 74th place with a price of $0.9. The top altcoin has lost 97% of its money in capitalization.
After this fiasco, all funds will be as cautious as possible to invest in new projects. Also I'm sure that many of them will think about their past investments and maybe reduce them somewhere, because Luna was not a shield at 1000 some place in KMC top, the project was top-7, at times even top-5, and now 74th place. All the depositors' money burned, turned not even into a pumpkin, but into air.
Luna is left with 2 development options, either they declare bankruptcy and the project turns into the biggest ragpole in crypto history or funds, investors come and give their own rescue plan, to which Kwon agrees and starts dancing for them.