LUNA Approaches 0 as UST Stablecoin drops to $0.33

Do Kwon causes TerraUSD drop

LUNA and UST on the verge of collapse

A crazy sequence of events have happened since our article yesterday about LUNA and UST. The price of Bitcoin is hovering around $30,000, while LUNA has dropped over 90% to $1.50 at the time of writing this. The UST stablecoin has dropped another 50 cents, hovering around $0.30. The fact that LUNA was trading at $50 yesterday shows the immense selling pressure.

Based on these latest events, there is a real danger of both cryptocurrencies collapsing within the next few days. 

Damage control or funeral arrangements?

It appears that Do Kwon, the CEO of Terra, is all out of options. He explained on Twitter this morning that the "price stabilization method" is failing to keep the price of UST from falling as LUNA plummets. After a lengthy thread explaining the community initiatives to solve the problem, he admitted that there will be a change in the protocol to make it collateralized. So, that means that UST will now be similar to others such as Tether and USDC, defeating the purpose of a decentralized algorithmic stablecoin. Kwon has also declared himself the "master of stablecoin," which is not holding up so well as public support for him wavers.

As shown by this ordeal, collateralized stablecoins, while centralized, are far safer than algorithmic stablecoins. Even though a collateralized stablecoin involves holding physical USD reserves and other assets, those stablecoins have maintained their peg.

The inflation numbers for the United States recently came in at 8.3%; slightly above estimates, so the market could see further red in the coming days. The closest catalyst for a Bitcoin price increase is the first Australian Spot Bitcoin ETF launch on Thursday, but the chances of a relief rally are decreasing every day. If LUNA and UST hit zero, Bitcoin could see a further drop to $25,000.