The hit TerraUSD (UST) stablecoin oath also caused LUNA to lose nearly 33% since May 4 before hitting a daily low of $ 59.44 yesterday.
The decline of LUNA was more pronounced on May 7 and 8 when these assets declined by more than 23% making the moment the lowest record in the last 3 months.
Apparently the LUNA price collapse had something to do with UST’s $ 285 million liquidity from various protocols including Anchor Protocol; Curve; Ethereum; Binance; and not to be outdone Terra's founder, Terraform Labs caused the stablecoin to drop to $ 0.98.
What has LUNA got to do with UST?
Before that, readers can refer to this article and the basics of the LUNA cryptocurrency for a better explanation.
Perhaps many don’t know, LUNA is a collateral asset with the aim of maintaining UST’s backing against the US dollar.
This means that when the value of UST crosses the $ 1 level, Terra will open up opportunities for consumers to burn LUNA (drive up the price of LUNA) and produce UST (meet investor demand).
Similarly conversely if UST drops below $ 1, consumers have the opportunity to burn UST (supply is increasingly limited) and produce LUNA (the price of LUNA is difficult to increase due to abundant supply).
Based on chart observations, UST’s supply on May 8 had declined for the first time in two months by 28.1 million; and at the same time LUNA supply soared to over 436.75 million.
It is concluded here that the excess daily supply causes the demand for LUNA to be too low, prompting a decline in the price of the asset.
LUNA price expectations: positive or negative?
Not sure how deep LUNA will sink but analysts think, based on the significant downtrend there is a possibility this asset will touch the price around $ 22.
But if the trend makes a drastic change, LUNA has the potential to soar to $ 130 per unit.
