Trading halted in collapsing cryptocurrency network amid market rout
The value of one of the world’s biggest cryptocurrencies has been all but wiped out in the space of four days amid a market rout that has shaken confidence in the sector.
The price of Luna has fallen from more than $60 (£49) each on Monday, when it was the fourth-most popular coin in the world, to $0.00003748 on Friday morning.
The total value of all Luna in existence has fallen from more than $20bn (£16.4bn) on Monday to $264m.
Luna exists to prop up the value of Terra, a so-called “stablecoin” designed to be tied to the price of the dollar.
In theory, Terra owners are supposed to be able to trade their coins for one dollar’s worth of Luna, ensuring that Terra’s price is stable.
But a loss of confidence in the system maintaining the price has led to a mass sell-off of Terra, in turn driving down Luna’s price. Terra has fallen from $1 to $0.16 on Friday morning.
Trading in the Terra network, on which Terra and Luna trade, were suspended on Friday. The network’s operators said they were looking to “reconstitute” the network to bring back stability.
According to reports in Korea, the wife of Luna’s founder Do Kwan filed a police report after an investor appeared at her door looking for her husband.
Meanwhile, investors in the US sued the cryptocurrency exchange Coinbase over the state of a separate stablecoin, GYEN.
Users said Coinbase had misled investors about the token’s stability. According to the lawsuit, it was supposed to be tied to the Japanese yen but traded hands for as much as seven times that when Coinbase added it to its exchange last year, leading to huge losses when it reverted to its original value.
The Terra sell-off, which has been likened to a bank run, has rocked cryptocurrency markets this week. On Thursday, Bitcoin fell below $27,000 to its lowest level since 2020 and well below its November 2021 high of more than $67,000.
Some recovered on Friday. Bitcoin rose above $30,000 while Tether, another stablecoin that had been hit by a sell-off, recovered to trade around the dollar mark.