It has been a week of free fall for LUNA, the native token of the Terra network, as it lost up to 99.7% of its value. The coin is down from $62 at the beginning of the week and $120 in mid-April.
This change in market dynamics has also caused traders to lose over 99% of their investment, a development that has birthed intense panic in the cryptocurrency ecosystem.
Since the beginning of the week, LUNA has broken through several support levels, and at the time of writing, the coin is exchanging hands at $0.042.
LUNA/USD 24-hour price chart (Source: Trading View)
Similarly, the network’s stablecoin TerraUSD which is supported to be pegged to the US dollar in a ratio of 1:1, has lost its peg and currently trades at 56 cents.
Over the weekend, investors had liquidated their earnings on several exchanges, driving interest rates, and value lower.
Because LUNA serves as collateral for UST to retain its value, 1 UST can be exchanged for $1 worth of LUNA, creating demand for both coins.
UST trading at 57 cents has significantly increased the circulating supply of LUNA. And data suggest that the circulating supply of LUNA tripled from 377 million two days ago to $1.4 billion tokens on Friday.
Meanwhile, to address this issue, Terra has outlined some measures that they take. These include burning $1.4 billion worth of UST and staking 204 million LUNA tokens.