Terra (LUNA) to relaunch without UST stablecoin to save the ecosystem.
For the first time ever, Bitcoin (BTC) has incurred losses for seven consecutive weeks. The selling of BTC continues unabated amid concerns of a weakening global economy. Crypto markets experienced a week of historic volatility and uncertainty post the debacle involving two of the top 10 digital assets by market cap erasing nearly $40 billion in investor value. UST lost its $1 peg and Terra (LUNA) collapsed to a price of $0.00001 as its supply hyper-inflated. Tether (USDT), the largest of all stablecoins, quickly came under pressure over the quality of its peg to the US Dollar. BTC has lost more than 20% in value since the LUNA-UST drama took place. In today’s article, we will take a brief look at the price actions of major crypto assets and a summary of Terra’s hard-fork proposal.
Bitcoin continues to be the king
After reaching the lows of $26,700, BTC has recovered back to the $30,000s fighting to stay positive amid the stablecoin contagion. At the moment, the bulls witness selling after every minor rally. BTC was turned down at $34,000 turning it into short-term resistance while $30,000 has flipped to support. BTC will also enjoy strong support at $28,800, failing which the recently formed wick at $26,700 will offer the next crucial support.
Bitcoin dominance, which indicates the strength of BTC relative to the entire crypto market, has surged quickly from 41.7% to 44.3%. This figure is expected to hit 50% in the upcoming months. Given the direct correlation between the Bitcoin dominance and altcoin season (where most of the coins other than BTC register good returns), it’s more likely to see altcoins go even further down in the near future. The only asset which is expected to hold strongly against BTC’s dominance rise is Ethereum (ETH). Investors are advised to manage their risk profiles if overexposed to altcoins at the moment.
Ethereum – merge is coming
ETH, which is coupled to BTC’s price action, fell steeply to the $1,800s before making a comeback to $2,000 level. ETH is currently trading at $2,080 with 3% gain over the previous day. Its major support in the coming days has formed at $1,800 while next major resistance to break remains at $2,160. Meanwhile, Ethereum blockchain is gearing up for a major upgrade to its consensus mechanism – migration from proof of work (PoW) to proof of stake (PoS). Touted as the “Merge”, ETH will become ETH 2.0 with energy efficient processes, faster transactions and lower gas fees. Additionally, the upgrade will make ETH’s supply to ‘burn’ making it a deflationary asset and offering a chance at good returns for long-term investors.
ETH is poised to become an important asset to the decentralized finance (DeFi) space. Though many competitors have emerged to solve ETH’s current problems, they all are missing out on one crucial factor – its network effects. Up to this point, ETH has effectively been the default option for anyone interested in building a Dapp due to the strong network that has been built around the Ethereum Virtual Machine (EVM).
Terra’s Revival
Do Kwon, the co-founder of Terra, has come up with a proposal to hard fork the existing blockchain to make a new layer-1 blockchain without dependence on the UST stablecoin. Here’s the summary of the proposal:
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Fork the Terra chain into a new chain without the algorithmic stablecoin. The old chain to be called Terra Classic (token Luna Classic – LUNC), and the new chain to be called Terra (token Luna – LUNA) -
Luna to be airdropped across Luna Classic stakers, Luna Classic holders, residual UST holders, and essential app developers of Terra Classic
While this is seen as a welcoming sign by many crypto experts, whether it will be enough to re-establish trust in the crypto ecosystem especially with LUNA investors or not, only time will tell.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.