Even as the original Luna cryptocurrency trades at well below 1 cent, backers of the Terra blockchain have launched “Luna 2.0”—to a somewhat mixed reception from investors.
The new Luna 2.0 started trading Saturday and hit a high of nearly $20, according to CoinMarketCap. It then hit turbulence—not new for Luna—and fell below $4. However, the new Luna started trading on Binance, the largest cryptocurrency exchange in terms of daily trading volume, and is now trading around $9.
Last week, supporters of the Terra blockchain project voted to resurrect Luna after the token collapsed in conjunction with its TerraUSD stablecoin. It was just in April the Luna token hit a high market cap of around $41 billion.
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The TerraUSD—also called UST—was an algorithmic stablecoin. Algorithmic stablecoins use financial engineering to maintain their 1-to-1 peg between the backup assets. In UST’s case, it is pegged to Luna.
However, in UST’s case the 1-to-1 pegging did not work and the market for UST and Luna crashed. Terra supporters did not vote to revive the stablecoin as part of the new Luna 2.0.
Regulators eye the sector
The collapse of the TerraUSD and the instability of so-called stablecoins have drawn significant attention around the world from regulators and governments as agencies try to gauge how a collapse could impact the broader economy.
Just today, the U.K. proposed amending rules and policies to manage potential failures of stablecoins that could threaten other financial systems.
“Since the initial commitment to regulate certain types of stablecoins, events in cryptoasset markets have further highlighted the need for appropriate regulation to help mitigate consumer, market integrity and financial stability risks,” the U.K.’s finance ministry said.
Illustration: Dom Guzman
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