Let’s review the beginning and consequence of the latest crypto crisis that has shocked the world! A Real-life lesson that you must know!
It begins with Terra, a blockchain designed for algorithmic stablecoins, to repair an inefficient payments industry. LUNA, Terra’s native token, is used to stabilize the price of UST, the protocol’s stablecoins. During May 9-14, 2022, LUNA prices fell drastically, causing UST to break its 1 dollar peg to $0.15. Based on the system’s algorithm, they had to build more LUNA to support UST, followed by the uncontrollable oversupply and the ecosystem collapse. Terra solved the situation by launching Luna 2.0 on May 28, 2022, and trying to regain investor trust.
The collapse of LUNA and UST has impacted Celsius, a crypto lending platform that accepts and offers returns at 17% for UST. As LUNA crashed, the platform’s liquidity also drained, causing the price of Celsius token CEL to collapse. The company decided to pause withdrawals, swaps, and transfers on its platform to stabilize its business and protect its customers and announced on July 13 that it filed for Chapter 11 bankruptcy after a month of turmoil.
Along with Three Arrows Capital (3AC), a cryptocurrency hedge fund, and Babel Finance, a crypto lender both are at risk of bankruptcy from LUNA.
Due to the constant downside of the crypto market, let’s turn this crisis into an opportunity as it gives us a clear view of the quality of the project management and risk diversification. Therefore, this is a crucial time for investors to stay up-to-date with the news.
Finally, we encourage you to do your research and learn from this crypto crisis to sharpen your investment decision-making.
Disclaimer
: Due to the nature of crypto’s volatility and the potential loss in crypto investment, we always advise those interested in all types of crypto investment to gain knowledge and insight into the background information, and use cases accordingly. Also it is essential to ensure that you make a proper crypto investment suitable with your acceptable risk level
Source
https://techsauce.co/news/summary-of-the-crypto-crisis-luna-celsius-3ac
https://www.forbes.com/advisor/investing/cryptocurrency/what-is-celsius/
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