Losing hundreds of thousands of dollars in digital money because of believing in the 'top coin'


Dang Thanh (Dak Nong) spent more than 100,000 USD to buy Terra digital currency (LUNA), but his assets are now only a few hundred USD overnight.




"I bought LUNA from mid-April at 80 USD each and expect this token to continue to increase in price. This is a 'top coin' when it is among the 20 strongest coins by market capitalization, with The development roadmap is reasonable, so I trust and decide to spend a large amount of money," 
said Mr. Thanh, who has been involved in the digital currency market for three years.

This token price once increased to nearly $97 at the end of April, before reaching $86 per coin on May 6. Thanks to that, he made a few thousand dollars in just half a month.



However, on May 9, the price of LUNA "falled vertically" from 77 USD to 5 USD and on 12/5 it was only 0.1 USD/dong

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"Because I didn't set a stoploss, I almost lost all my money overnight. Now, when I look at my account with a few dozen dollars left, I can only delete the app and try to forget it," said Mr. Thanh. Stoploss is a feature that allows a player of a cryptocurrency or stock to pre-set the selling price to stop loss. When this price is reached, the token will automatically be sold.

Before losing more than 100,000 USD, Mr. Thanh believed he did not lose too much even when the market "collapsed" because LUNA was on the list of "top coins", less volatile compared to other coins. But now, he admits he was wrong.

Meanwhile, Le Diep (Thanh Hoa) also lost $20,000. On May 11, thinking that this token had hit a "bottom" when it dropped to 18 USD per coin, she invested all of her savings in the hope of making a profit. However, LUNA continued to decrease to one USD, making Diep's account only a few dozen dollars in a few hours.

On social networking groups, the topic LUNA appeared with a sharp increase in frequency since May 9. Some said they lost all their assets because they believed in LUNA. The amount of damage is listed from tens to hundreds of thousands of dollars, some people even lost nearly a million dollars.

"Different from previous 'junk' coin cases, it is really surprising that players go empty-handed when investing in top tokens like LUNA. Many people still don't think they lose money so quickly because of 'coins'. top' are the top tokens with high stability and low price volatility", commented Mr. Bang, admin of a Facebook group about digital currencies with more than 150,000 members and 5 years of participating in the cryptocurrency market. .

With his experience, he evaluates LUNA as a reliable digital currency, with a strong team behind, invested by many funds, capitalization when it peaked at more than 30 billion USD. In addition, the project also controls TerraUSD, a stablecoin that is pegged to the equivalent of one USD, similar to Tether (USDT) and Binance USD (BUSD).

“The fact that LUNA lost most of its value overnight represents instability in the crypto market. Any token can collapse, even if they are in the top, well routed or invested. much," said Bang.

Phan Hoang, a blockchain and cryptocurrency expert, also thinks that the collapse of LUNA shows how fragile the cryptocurrency market is. He recommends that players should have a specific strategy when participating and prepare mentally if they lose their assets. "Any amount of money can go to zero value in a short time. Players need to set a stoploss to limit losses, and at the same time be ready for a situation where all their assets are lost," he said.

Why did LUNA plunge?

Terra is a blockchain created by Terraform in 2018 with two founders, Do Kwon and Daniel Shim. The Terra network uses the DPoS consensus mechanism, which allows smart contracts to generate various stablecoins. The most famous of which is UST - the fifth largest stablecoin by market capitalization as of May 9.

LUNA is Terra's project governance token, which plays an important role in the UST and its stablecoins. In principle, UST is the raw material to make LUNA and vice versa, LUNA is also needed to cast UST.

The correlation between the supply of LUNA/UST will keep the UST rate approximately equal to the USD price. When the price of UST is low, players will buy it and change it to LUNA to make a profit. Conversely, when the price of UST is high, the player can exchange the LUNA equivalent of one USD into one UST to eat the difference. On the other hand, LUNA has a close relationship with UST. This token has a total supply of one billion coins. If the network exceeds one billion LUNA, Terra will burn LUNA until the supply returns to equilibrium.

However, the aforementioned balancing algorithm has fluctuated dramatically since the beginning of May, when the de-peg status for UST appeared. De-peg is the term for a token that no longer holds a previously fixed rate on a currency.

Specifically, when UST is de-peg, players still convert UST to LUNA according to stablecoin balance algorithm to cut supply. But at this time, the amount of UST transfer increased dramatically, leading to a sharp drop in the price of LUNA. As a result, UST no longer maintained the level of one USD, and LUNA also collapsed.

According to experts, the only way for the Terra team to save the situation is to accept the sacrifice of one of the two tokens. On May 11, on Twitter, CEO Do Kwon said he chose to keep UST. He proposed a series of measures to collect UST and reduce the supply in the market. One way is to accelerate burning and minting of LUNA/UST to 1.2 billion tokens/day in exchange for the amount of UST collected.

In the end, the amount of LUNA that appeared on the market exceeded the initial total supply of one billion tokens, causing its price to fall vertically. From above $80 per coin in early May, it is now only $0.05 and continues to decline sharply.

Meanwhile, efforts to save UST have not been really effective. This stablecoin once dropped to 0.3 USD, before recovering to 0.6 USD,

 

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