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The Correlation between LUNA and UST’s price fall

While the cryptocurrency market struggles to find its footing, LUNA holders and investors have been pulled into the water with the major price crash caused due to several factors. Over the last week, the internet has been buzzing with Terra Luna’s stablecoin UST and native token LUNA’s major price fall. 

While some people are worried about the price fall of LUNA’s token from the high of $99.24 earlier this month to now $0.0002136, others are debating over the price stability of stablecoins as UST’s price came crashing down by over 50%. However, both the price falls are interlinked and happened due to the selling pressure of the bear market. 

LUNA and UST

Terra Luna is a blockchain network that uses fiat-pegged stablecoins to power price-stable global payments systems. LUNA is the native token of the blockchain network and also acts as the governance token. At the same time, UST is the most popular stablecoin in the network.

The kicker here is that UST and LUNA are interlinked together, so to create UST, the user has to burn LUNA tokens and remove them from the circulating supply. So earlier, when LUNA was trading at $85, for instance, a user could burn 1 LUNA token for 85 UST. 

However, earlier this weekend, over $2 billion worth of UST tokens were left unstaked, and hundreds of millions of these were sold immediately. This huge sell pushed the price of UST to $90 cents which caused traders to exchange $90 cents worth of UST for $1 worth of LUNA. But as only $100 million worth of UST could be burned in a single day. It ignited a selling war in the industry, causing the price to fall. 

These different gears turned into motion simultaneously, causing a heated discussion about the stability of the stablecoins. This downfall also gave the naysayers of the industry an opportunity to build on their views of cryptocurrencies being a risky investment. However, every smart crypto investor understands the volatility of the market and patiently waits for the right moment to turn a profit. 

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