Terra (LUNA) Slumps 11%, Too Altcoins Follows Suit

On Saturday, Terra (LUNA) led a meltdown in altcoins as investors locked in recent gains in the market due to weakening sentiment. For the week, most major cryptocurrencies also witnessed significant losses.

LUNA dropped 11% to a new 52-week low of $94.13. It was trading roughly 27% lower than a record high set earlier this week. Then, and had dropped nearly 13% in the previous seven days.

Cardano (ADA), Solana (SOL), and Ripple (XRP) were among the cryptocurrencies that lost between 3 and 10% of their value. Profit taking is likely to blame for the majority of the drops, as investors sold at the end of a fantastic crypto run over the past two weeks.

Concerns about increasing inflation and the Federal Reserve’s relentless monetary tightening further dampened market mood. Bitcoin and Ethereum both dropped by 2.6 and 1.6 percent, respectively.

Concerns about LUNA’s long-term viability have been raised.

However, among its peers, LUNA suffered the most losses, owing to mounting doubts about the long-term viability of its stablecoin, TerraUSD (UST).

UST’s specialization in one protocol, Anchor, has been criticized by a number of crypto pundits as making it less feasible as a decentralized stablecoin.

https://twitter.com/0xHamz/status/1512095858430562306

The use of LUNA to develop Terra’s stablecoin reserves, as well as the usage of a volatile currency like Bitcoin in the reserves, were both questioned.

Don’t mean to be a party pooper but I think Terra is making a mistake to use LUNA funds that originated from the ICO to build the @LFG_org reserve.

The goal of $UST is to be (i) decentralized and (ii) sustainable.

This reserve is neither of those two things.

— Eric Wall X 🏴 (@ercwl) March 28, 2022

Terra was allegedly not totally burning LUNA to UST, but rather using a portion of the allegedly burned tokens to acquire BTC. That’s, according to commentator @JackNiewold. If confirmed, the move would put inflationary pressure on the token.

1. 'BURNED' $LUNA DOESN'T GET BURNED

Previously if you swapped $UST for LUNA, it would burn $LUNA.

NOW, if a user creates $UST, some percentage of the LUNA is used to buy $BTC.

Obviously, this creates inflationary price pressure on $LUNA.

— Jack Niewold 🫡 (@JackNiewold) April 8, 2022

While Terra’s CEO Do Kown has denied the allegations, LUNA’s massive losses may indicate that traders believe the rumors are true.

Due to recent losses, LUNA has lost its position as the sixth-largest cryptocurrency by market capitalization. Then, and is now trading at $33.4 billion.

Tweets by stablekwon

Will altcoins continue to rise?

Over the last few weeks, altcoins have outperformed their larger counterparts in terms of price movement. Bitcoin’s dominance had gone dangerously close to dipping below 40% as a result of their rapid advances.

While most altcoins have had a tough week, they are expected to experience more rises. Over the last few weeks, institutional interest in the tokens has increased. Then, and it is expected to continue to do so.

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