Ethereum Following Bitcoin in Downward Spiral
Ethereum Following Bitcoin in Downward Spiral
The crypto market has taken a substantial hit in the past few days after the staggering collapse of Luna. A coin that was once ranked 4th in terms of market capitalisation has become almost worthless; trading at $85 just a week ago, it sits at $0.04 per coin and could fall even lower.
Any time a major cryptocurrency is affected by a scandal, the rest of the market also takes a substantial hit. People who are spooked by the news rush to withdraw their own cryptocurrency scared that the same thing could happen to Bitcoin or Ethereum. Both of these crypto giants have been suffering a lot this past week, dropping 25% and around 30%, respectively – just in the past week! This isn’t to mention how far both of these currencies have fallen from their all-time highs of November 2021.
In order to understand why the market has taken such a substantial downward turn in the past week, we must understand what happened in the Luna scandal.
Since its inception, Luna has had a strong link with the stablecoin TerraUSD (UST). For those who are relatively new to crypto – a stablecoin is a coin that is designed to be pegged to a real-world asset and as such does not see any significant changes in value. UST was designed to be pegged to the US dollar. However, earlier this week UST decoupled from the dollar which caused a significant drop in its value.
While the exact cause of this decoupling cannot be known for sure, traders have speculated that it was caused by a series of significant withdrawals from the Anchor Protocol. Anchor Protocol is kind of like a crypto bank that was created by Terraform Labs – the same company behind the creation of Luna.
As soon as the value of UST made that significant drop below $1, other investors rushed to sell their Luna and UST, which caused both currencies to spiral downwards to the point where both are trading at a fraction of the price they were last week.
Due to the fact that the start of this spiral is attributed to the sell-off by Anchor Protocol (essentially the creator of Luna and UST), it looks like the creator was cashing out of a classic Ponzi scheme. You see, one of the main appeals of Luna and UST was a guaranteed 18% APY for staking the coin – but there didn’t seem to be any clear mechanism for that money to be earned by the company, it looked like they were printing it from thin air! Obviously, that can’t last forever and it looks like Mr. Kwon picked a time to leave and tried to take as much money with him as he could.
Whenever a scam like this is run using cryptocurrencies, it triggers a sell-off across the market due to panic from investors. What made this scandal particularly bad was the fact that Luna peaked at #4 for market capitalisation in crypto – putting it alongside Bitcoin, Ethereum, BNB, and others.
The fact that a coin that was seen as so trustworthy by many casual investors turned out to be a scam puts doubt in the minds of many investors – if it can happen to Luna, why can’t it happen to Bitcoin and Ethereum?
Nevertheless, we’re backing Ethereum, and the crypto market as a whole, to bounce back from this. How long it will take to do so cannot be predicted, as who knows what will happen in the meantime. Crypto has always been a volatile market, as is every market in its early stages. While the technology is still new, people will continue to try scams like this – but it shouldn’t change the fact that reliable cryptocurrencies are a truly revolutionary advancement in technology.
Ethereum is changing the way we make payments in a digital world. With a fast, efficient payment system, lots of businesses now use crypto to take payments online, including retail stores, airlines, and even online casinos. There are plenty of casino sites that take cryptocurrency as a lot of people prefer to use it due to the privacy it offers. These sites have plenty of games for you to play, including online slots, roulette, 3-card poker, and much more! If online slots are your game of choice, why not take advantage of the no deposit free spins that some casinos have available. The best sites will even give new players a casino no deposit bonus which allows players to play casino games for real money without having to make a deposit. In the future, it’s likely that every business will accept cryptocurrencies like Ethereum!
While Ethereum has been significantly impacted as a result of the Luna scandal, we believe that it will come back stronger than ever.