Crypto warning: Terra Luna crash ignites ‘crypto panic’ as investors ‘reassess risk’

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LUNA has jittered through the market today, with plans from Do Kwon briefly breathing life into the currency. The founder proposed forking the token to a new chain, nudging it to $0.00022 (£0.00018). The wind has since left its sails, and it is back down to $0.0001881 (£0.00015), where it is holding firm, but the threat of another crash looms.

Over the last few days, experts have suggested that investors may view the crash as an opportunity to buy the coin while it remains near-valueless.

Temple Melville, CEO of Scotcoin, said the issues with LUNA were likely due to its specific weaknesses.

He said the coin and UST, its stable coin partner, were “built on an algorithm that rendered it inherently unstable”.

Mr Melville said the situation could draw parallels with “events in the traditional financial world”.

He likened the bust to “sub-prime mortgage lending in the build-up to 2008” and “the collapse of Long-Term Capital Management a decade earlier”.

Exchange platforms have asked people to exercise caution, with CoinMarketCap stating it is “experiencing extreme volatility”.

The coin’s state has caused a “bearish” attitude among the crypto community at large, according to Dr Pooja Lekhi, a professor at University Canada West.

Speaking to Express.co.uk, she said the experience has even managed to “deter venture capitalists”.

She said: “Terra Luna’s sudden crash is not an isolated incident.

“It has triggered a bearish sentiment in the crypto market.

“As Terra Luna crashed over 99 percent on May 13, crypto investors got frightened and started selling other coins as well, leading to a crash in the entire crypto space.

“According to CoinMarketCap, the crypto market recently had a market capitalisation of $1.2 trillion; less than half of the $2.9 trillion it was worth in November 2021.”

“Even the world’s leading crypto Bitcoin plummeted to $26,300 on May 12.

“The stock price of the largest U.S. crypto exchange, Coinbase Global, has fallen more than 75 percent this year.

“The collapse of these stable coins has wiped out more than $830 billion of the crypto sector’s total market value.

“It has a cascading effect across the hundreds of other projects built within the Terra ecosystem which includes non-fungible tokens (NFTs), and decentralised finance (Defi) platforms, driving them to a bearish trend as well.”

“The incident has also prompted regulators and authorities to call for restrictions and stringent laws governing these financial assets.

“It also added a spark to the heated debate around the decentralisation of crypto projects.

“Even venture capitalists are reassessing their risk tolerance to invest in crypto startups.

“The situation has caused a lot of crypto panic among investors.”

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