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Seeking Alpha 2022-10-06 17:55:39

Luna Classic: Dead Coin Walking

SummaryLUNA Classic has seen some impressive rallies in the last week.This can be attributed to the introduction of a burn mechanism.I don't think this will be enough to revive the coin.OverviewOne of the biggest implosions in the cryptocurrency space happened in May this year. Terra's UST (UST-USD) algorithmic stablecoin lost its peg. UST was designed to be at a $1 value but crashed to $0.13. Terra's governance token LUNA, now Luna Classic (LUNC-USD), also fell by 99.9%. The Terra crash caused shockwaves in the crypto space.Early analysis of wallets on Terra pointed to a top wallet as one of the wallets whose actions pushed the price of Terra UST out of peg. The wallet was linked to Terra ecosystem's chief developer, Terraform Labs. On-chain data showed that the said wallet swapped about 85 million UST for another stablecoin, the USDC. Terraform Labs also removed over 150 million UST from a liquidity pool on Curve, a lending platform. The price of UST fell immediately after these huge trades.Terra founder, Do Kwon, has since been on the run, with recent reports of an issued arrest warrant by Interpol. It is rumoured that Do Kwon might have fled Singapore, his known base.Unlike most other stablecoins which are backed by a USD reserve, UST's dollar peg relies on an algorithm which mints or burns LUNA to keep the value of UST at $1.Algorithmic coins, like UST don't have to be backed by anything. The peg was achieved by adjusting...

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