Crypto Crash Continues as TerraUSD Stablecoin Blockchain Fails and Luna Token Drops to Zero
The price of many cryptocurrencies continues to fall — a drop largely driven by widespread anxiety regarding the Federal Reserve’s actions to stem inflation and how bond sell-offs (and interest rate hikes) will affect investment markets.
On May 12, TerraUSD, one of the stablecoins previously tied to the value of the dollar, stopped processing new transactions. Likewise, the affiliated Luna token also halted trading with its value bottomed out at zero, Bloomberg reported.
During the first weekend of May, TerraUSD broke its peg to the U.S. dollar, and subsequently dropped to a value of 23 cents on May 11. It regained some ground to trade at 58 cents, CNN reported, but not before a further crypto sell-off dragged bitcoin down to roughly 50% of its all-time high. On the morning of May 13, TerraUSD had once again plunged to less than 20 cents, while the Luna token hit zero, compared to a high of $119.51.
In a May 12 tweet from a Terra developer — which has now been reposted and pinned by Terra’s verified Twitter account, @terra_money — the developer wrote: “The Terra blockchain has officially halted at block 7607789. Terra Validators have halted the network to come up with a plan to reconstitute it. More updates to come.” The message was retweeted 8,608 times and generated 9,304 comments and 29.3K likes, illustrating the intense interest in the currency.
On May 13 @terra_money tweeted an update that read: “the Terra blockchain has resumed block production.”
In another bright spot, bitcoin edged higher Friday morning, up 8.4%. However, at $30,775, it still sits well below its all time high of $68,990, based on CoinDesk figures.
The crypto market’s volatility has caught the attention of economists and investors alike. Bloomberg reported that Treasury Secretary Janet Yellen told the Senate earlier this week that “A stablecoin known as TerraUSD experienced a run and had declined in value. I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability.”