Terraform Labs in recent days has drained the entire BTC reserve and dragged the entire crypto space into a deep bearish pit. Bitcoin price has bottomed out, hitting the support levels it broke hard in December 2020 and never visited. On the other hand, in the crash spotlight, LUNA dipped deep below $0.3 and UST hovered between $0.67 and $0.7.
Now when the prices appear to be extremely volatile, the possibility of a massive drop ahead is extremely possible. And hence jumping in with a long trade may not be fruitful at the press time. However, on the contrary, much before the LUNA price, the UST may make a huge comeback to regain its peg at $1. Yet the LUNA may continue discovering lower support constantly until UST stabilizes a bit. But why UST first?
The reason is quite simple, the “Peg-Mechanism”, in which new LUNA tokens are created as the UST price loses its peg. According to Terra Analytics, over 2.7 billion LUNA tokens have been created in the past two days. And on the other hand, nearly 5.86 billion UST tokens were burned at the same time.
Therefore, when the supply crisis marks an entry into the UST ecosystem, the prices are compelled to be stabilized. But on the contrary, the LUNA prices may undergo a serious crunch as new tokens may keep on flooding the space for some more time. And hence the prices may be inversely impacted for an extended period.
Currently, the price of Terra has slipped sharply below $0.3 after falling more than 100% since the crisis began. In such a case, if the prices continue falling until the UST regains the $1 anchor, the LUNA price may deplete strongly by adding a few zeros in its price.
The LUNA price has now lost the lowermost support at $0.29 and continues to plunge below $0.25. Therefore, displaying a huge chance of sliding below $0.1, adding up a zero to its value very soon. However, the recovery is still pretty unclear as the traders lose their confidence as no buying volume is recorded despite Terra’s (LUNA) price being at a heavily discounted price.
