Published: September 14th, 2022
Terra’s LUNA found itself in back in the limelight late last week (wc 5th September) as a rebooted version of the troubled crypto token headed skyward on a 245 per cent gain on Friday 10th September. Despite the spike in its value over the last week, the rise looks to have stopped. On Tuesday 13th September it was down by more than a third from last week’s sudden high.
Figures from CoinGecko show that, at its current price of USD 4.16, LUNA has sunk a total of 37 per cent from last Friday’s high of USD 6.71. That level was the highest seen for LUNA since the first of June, a few days after the nu-generation version of the coin was airdropped to previous holders of the first generation LUNA coin. That one has since been re-badged as LUNA Classic (LUNC).
While the fallback is significant, LUNA has held on to much of its recent gain. At time of writing it was up 130 per cent for the previous seven days, more than doubling in a week after months in the doldrums around the USD two dollar mark.
It's worth noting that other coins in the Terra ecosystem have posted sharp spikes and dips in recent days.
LUNC has dropped 42 per cent since late last week’s surge and was down 15 per cent for the past 24 hours at time of writing. Nonetheless, LUNA Classic has stayed aloft, still up 30 per cent for the week and 240 per cent for the last 30 days.
TerraClassicUSD (USTC), the re-launched version of what used to be called UST, a dollar-pegged stablecoin, was down 10 per cent on Tuesday 13 September, but that drop still left it up more than 50 per cent over the last seven days and 60 per cent over the last 30 days. For perspective, the wider crypto market was only up about one per cent.
Before they were re-booted, USTC and LUNC collapsed in early May as the original UST stablecoin lost its dollar peg. LUNA, its paired crypto, plummeted as a result. As the time, LUNA and UST were cumulatively worth tens of billions of dollars’ in market cap. Their sudden and simultaneous crash is considered partly responsible for accelerating this year’s broader crypto bear market.
LUNC has risen more gradually than LUNA in recent weeks, and its steadier return to grace has happened amid community-led initiatives to rebuild the troubled Terra ecosystem. Measures including a transaction tax that will be spent buying and burning coins to cut the overall supply are one way Terra’s custodians are working to restore its faded glory.
It was a markedly different story for Terra and its ecosystem earlier in 2022. Crypto markets were sent reeling from the sudden collapse of first-generation Terra and UST, which saw their values slashed to zero in mid-May 2022, taking tens of billions of dollars in value from the market in a heartbeat.
It was bad enough that crypto industry watchers predicted a new round of regulatory rules would likely emerge as a result.
The US, South Korea, and Singapore all intensified regulatory oversight of DeFi markets in order to rein in risk. America's Securities and Exchange Commision, Treasury Department, and regulators in other countries all said that they're looking at tightening crypto regulations.
Chinese regulators said they had been keeping a close eye on USDT, and the Terra crash provided more ammunition to justify Beijing’s ongoing crypto crackdown, this time with so-called stablecoins in the crosshairs.
Singapore also took the crash as a trigger to re-think its crypto-friendly reputation, which has attracted crypto firms from all over the world. In the wake of Terra’s implosion, more than 1,000 local investors told police that they lost money on the project. The city state’s regulatory regime for crypto is almost certainly going to tighten as a result.
In crypto-mad South Korea, Terra’s crash delivered a hammer blow to a number of local finance firms. Crypto venture fund Hashed lost more than USD 3.5 billion and the government in Seoul has created a new financial oversight panel with the ominous acronym DEATH. Terra CEO Do Kwon has been summoned to testify at government hearings. A number of Korean law firms have initiated class-action lawsuits on behalf of consumers and investors, while prosecutors are investigating Terra for signs of intentional price manipulation.
Reports in Korean media said that the Seoul Prosecutors’ Office had subpoenaed former employees of Terraform Labs who were involved in developing the Terra ecosystem prior to its launch in 2019.
There has been speculation that developers expressed doubts about the TerraUSD (UST) stablecoin design from the very start and even warned founder Do Kwon that the algorithm which maintains the coin’s US Dollar peg could eventually fail. It's been alleged that Kwon ignored the warnings.
Now prosecutors want to know if Kwon was aware of those issues while also looking into potential price manipulation by the company.
Additionally, Korean authorities are looking again at domestic cryptocurrency exchanges to see if they undertook required review processes before listing UST and its sister token LUNA.
A report in Korea’s national newspaper the Korea Herald on Tuesday claimed that Terraform Labs, the Singapore-based company behind TerraUSD and Luna, shuttered its South Korean office last year to avoid paying local taxes.
In an interesting turn of events, on Wednesday 14th September, South Korea issued an arrest warrant for Do Kwon. While the specifics of the warrant haven’t been shared, prosecutors in Seoul have been investigating whether Kwon and a partner had evaded taxes by moving crypto profits into offshore accounts.