Luna was a layer 1 platform focused on the DeFi (Distributed Finance) protocol with the algorithm Stablecoin UST. Stablecoin is equivalent to cash in crypto space and is often one of the fiat currencies (USDT) Or cryptography (DAI).
These are important for most DeFi protocols. The UST was unsecured and maintained its value of $ 1 with the help of arbitrage.
This was possible because anyone can convert UST $ XYZ to LUNA $ XYZ and vice versa in any market environment. Therefore, when the price of UST exceeds $ 1, people buy LUNA (eg $ 100) from the market, convert it to UST and sell UST ($ 100 or more) on the market, which is a risk. You will get no great profits. As the supply of UST increases and the supply of LUNA decreases, the value of UST also returns to $ 1.
Unfortunately, this activity is bidirectional, which is why LUNA collapsed. A large amount of UST was dumped in the market and pegs were lost towards the decline.
This triggered an arbitrage transaction that was supposed to return the value of UST to $ 1. People started buying cheap USTs from the market, converting them to LUNA (more valuable) and selling them in the open market to realize risk-free profits.
This led to an increase in the supply of LUNA at the expense of returning the pegs. This didn’t happen because the huge dump of LUNA brought a lot of fear to the market regarding UST’s depeg. Therefore, as soon as the value of UST approached the dollar, people sold UST at a higher price.
The Luna Foundation then decided to sell $ 3 billion in BTC on the market to relieve LUNA pressure (because many LUNA were cast to regain UST pegs). But it didn’t work and the whole market fell. Eventually, the people lost confidence in UST and were greatly depressed. LUNA supply surged to 6,541 billion tokens.
The founders of the project have come up with a new strategy to revive LUNA by creating new chains and airdrops for those who have lost money. AirDrop started at the end of May and new tokens (also known as LUNA) were listed on all major platforms by the end of the month.
Solana stop
Solana, a layer 1 blockchain that has grown 100 times over the last two years, has stopped again. This is the eighth time Solana has fallen. It’s very ironic because it’s multiplied by 100 due to scalability, which is one of the biggest issues in the Layer 1 platform.
The project is backed by several celebrities in the crypto industry, but the price plunge has made private investors a big hit. Similarly, DeFi users were unable to add margin and were liquidated. It doesn’t crash like Luna, but it seems to follow the same route as Luna.
Top winner of the week (as of 7:00 am on June 5, 2022. Source: CoinMarketCap)
⦁ Waves (WAVES): 89% up
⦁ Helium (HNT): 32% up
⦁ Cardanao (ADA): 21% up
⦁ Graph (GRT): 17% up
⦁ Saw chain (runes): 16% up
Top loser of the week (as of 7:00 am on June 5, 2022. Source: CoinMarketCap)
⦁ Solana (SOL): 12% down
⦁ Convex Finance (CVX): 10% down
⦁ 1 inch network (1 inch) 6% down
⦁ Phantom (FTM): 6% down
⦁ Curva Dao (CRV): 5% down
(Note: Only the top 10 cryptocurrencies are considered)
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