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Luna's fall unnerves Korean crypto investors

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Seen above is a price chart of Luna. Screenshot from CoinMarketCap
Seen above is a price chart of Luna. Screenshot from CoinMarketCap

By Lee Min-hyung

Korean crypto investors' fear sentiment is reaching its peak after Terra's flagship stablecoin UST started dropping its intended $1 peg on Monday, in what is seen by many as a "prelude" to the ongoing collapse of its sister token Luna.

Luna was traded at around 12,000 won ($9.40) as of Wednesday at 3:20 p.m., according to Korea's largest cryptocurrency exchange Upbit. This is a drop of around 50 percent from a day earlier. Up until last week, Luna was valued at more than 100,000 won.

Luna has drawn global attention for the past year as one of the most influential cryptocurrencies here and abroad, with its market capitalization becoming the world's seventh-largest in March. Terra's anchor protocol ecosystem was behind Luna's rapid rise, as it has offered a high yield to investors.

The recent de-pegging of UST, however, has tainted Luna's global fame. Many critics also raise issues over the credibility of UST as a stablecoin, further boosting Luna's sharp decline.

Do Kwon, co-founder of Terraform Labs which developed the stablecoin also played a crucial role in attracting more Korean capital into the cryptocurrency. The Korean entrepreneur has made global headlines in recent months by sharing his ambitious plans to expand the scale of the ecosystem.

Given the credibility issue, it remains unclear whether Luna will be able to regain its sheen and enjoy its heyday once again.

Following Luna's massive drop, crypto exchanges here and abroad have issued a series of warnings for investors.

Korbit, one of the nation's major exchanges, decided Tuesday to designate Luna as a cryptocurrency that must be watched closely before making investments. The decision was made as the price plunged by more than 50 percent in a day.

After monitoring the future price movement of Luna, Korbit will decide whether to cancel the designation in 72 hours. But the exchange said it does not mean that trading for Luna has come to a halt due to the designation.

Coinone, another major exchange here, also suspended trading of Luna temporarily on Tuesday due to its abrupt and sharp fall. Binance, the world's largest crypto exchange, also made a similar decision due to investors' abrupt selling spree.

"As Luna was developed by the Korean entrepreneur and has been at the center of global attention, it has drawn major attention, particularly from Korean investors," an industry source said. "As any cryptocurrencies ― excluding Bitcoin and Ethereum ― are exposed to such risks of high volatility, it remains to be seen whether Luna will be able to bounce back sometime in the future."

A prevalent view is that the global cryptocurrency market has entered a cycle of adjustment after the U.S. Federal Reserve started its aggressive rate hikes. As the market shows a pattern of coupling with the U.S. stock indexes, the aforementioned major cryptocurrencies have also been extending losses in the past few weeks.

Lee Min-hyung

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