Bitcoin (BTC) has moved from close to $26,000 to over $30,000 in recent hours as the virtual currency tries to recover from the most recent crypto crash triggered by the Terra ecosystem. The UST stablecoin linked to the LUNA virtual currency has crashed in recent days and this has pushed the crypto market downwards and to the lowest point since early 2021.
Bitcoin Recovers After Recent Price Crash
Bitcoin has already recovered by 15% in the last hours since it bottomed below $27,000 on May 12, 2022. The virtual currency is now being traded at close to $30,500 and it was able to recover despite being far from its $40,000 price level a week ago.
Other virtual currencies have also recovered in recent hours. According to data shared by CoinGecko, in the last 24 hours, the top gainers were GALA (54.8%), GMT (52.2%), MANA (51.1%) and XEC (48.5%). The biggest losers include UST (-82.9%), PAXG (-2.4%) and AXS (-2%).
Therefore, we see that it has been a very positive day for the cryptocurrency market with just stablecoins registering slight losses (between -0.1% and -0.5%). Among the top 10, we have Ethereum (ETH) with a price increase of 4.9% in the last 24 hours, Binance Coin (BNB), growing by 11.1% and XRP, which surged by 15.5% during the same period of time.
Terra Ecosystem Destruction
The crash in the cryptocurrency market started with UST, the USD stablecoin of the Terra ecosystem, falling and losing its peg. This triggered a situation in which new Terra (LUNA) tokens were created, pushing the price of LUNA lower.
LUNA had a price of $116 in April this year and $86 on May 5th. Now, LUNA can be purchased for $0.00001302, which basically means that its price has gone to zero. It is also worth taking into consideration that the Terra blockchain has officially halted at block 7607789.
According to the official Twitter account of Terra, network validators have decided to halt the network in order to come up with a plan to reconstitute the whole ecosystem. 9 hours after this information, there has been no official information from @terra_money Twitter handle and the blockchain network continues to be down.
The Terra community is now analyzing the possibility of restoring a snapshot prior to the attack and removing TFL, fully collateralizing UST and drafting new mechanisms for LUNA. Nonetheless, at the time of writing this article, there are no conclusive comments from the team behind LUNA. Therefore, this project might need some time before coming up with a solution to restore the trust and confidence in this project.
This is not the first time that a project crashes in the way LUNA did. In the past, BitConnect (BCC), a recognized Ponzi scheme, fell by over 99%.