The Global Cryptocurrency Market has constantly had its fair share of free falls and Uptrends in varying degrees, and this is primarily due to the volatile nature of the emerging asset class. This is why most, if not all, financial experts advise crypto enthusiasts, traders and investors to always perform their due diligence before investing in any crypto asset.
Following the recent crypto market dip, with Bitcoin showing some resistance at $29,000, Ethereum at $2,000 and several other coins experiencing downtrend, it is safe to say that the “bears” are having a swell time in the market.
Two of the world’s largest cryptocurrencies; Terra ($LUNA) and TerraUSD ($UST) are facing unlikely extinction from a “multi-billion dollar bank run”.
Few days ago, there was $14 billion locked up in Terra. This was one of the major drivers of adoption, until the crypto market dipped over the weekend, LUNA and UST were hit. LUNA fell 50% within 24 hours and UST (Algo stablecoin) got de-pegged from $1 all the way down to 69 cents.
Apparently, we can’t say if these coins are going to recover or not and the big question on everyone’s mind is “how did this happen” and “what does this mean for you”??
In a bid to provide answers to these questions and more, Crypto Experts Rume Ophi (The “CryptoPreacher”) and Lucky Uwakwe, Founder SaBi Groups, joins us on the Inside Blockchain Show to give their insights on the best possible ways to navigate the current market dip.
Sharing his thoughts on the Luna & UST Collapse, Rume disclosed that;
“This is a serious situation we have at hand…We are already seeing signals from the US Government to step in and regulate the stablecoin asset class. My fear is the Government will always try to meddle in issues like this. People are already suggesting that if a project like Terra could drop below 90%, it only points to a likely rugpull…I think Terra has a lot of work to do by convincing and providing a viable solution, and this situation might invariably lead to more stiff regulation”
One of the reasons why people have invested so much into LUNA and UST is because of a decentralized savings protocol called anchor protocol which promises investors a stable APY of around 20% which is obviously outrageous, especially given how stable stable coins are supposed to be. This led to many speculations and accusations that it might be a Ponzi scheme.
In view of this, Lucky stated that;
“Anchor Protocol was also part of the downfall of Luna & UST. As someone who has a good understanding around DeFi, there is no way you can sustain 20% APY for a long period of time and a large volume of users. It’s true that some other projects may promise higher APY, but when you make it fixed, it becomes a problem. There should have been a dynamic change earlier on. I understand that at the initial stage, it was used as a growth tactic to onboard new users, but afterwards when more funds were locked in the TVL of the protocol, it became crystal clear that the 20% APY was not sustainable.”
Bobby is a media personality and academy lead at Earnathon. He is passionate about cryptocurrency and the blockchain technology, as well as the value it drives in the present global economy. He is a freelance writer, actor and voice over artist. He enjoys cooking, singing and networking.
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