Crypto token Terra and its sister crypto coin Luna plummeted on 11 May after the stablecoin de-pegged from the US dollar.
TerraUSD (UST) – which is supposed to maintain a 1-to-1 peg with the US dollar – was trading at $0.61, as at 08:00 on Thursday, having fallen to a low as $0.26 earlier in the day.
Luna also saw its value plummet on Wednesday to $0.90 before recovering slightly to $1.78. The crypto coin has lost roughly 98% of its value over the past week.
UST is a decentralised stablecoin that mints and burns tokens to stabilise the price in line with the dollar in a bid to avoid the volatility associated with cryptocurrencies.
Terra was co-founded in 2018 by Daniel Shin, one of the founders of South Korean eCommerce platform TicketMonster, and Do Kwon, a former Microsoft and Apple software engineer. The coin also offers financial tools applications and NFT solutions.
After the coin depegged, Kwon made a last-ditch attempt to restore UST to its alignment with the dollar by increasing the rate of luna minted per day in a bid to boost the price.
UST backers are seeking $1.5bn to help prop up the coin, according to Bloomberg.
ETF issuers have launched several crypto ETPs tracking terra in recent months.
21Shares launched the world’s first terra ETP, the 21Shares Terra ETP (LUNA), in January, with roughly $5m assets under management.
This was followed by the Valour Terra (LUNA) ETP which launched in February and the VanEck Terra ETN (VLNA) which launched last month.
The impact of terra’s freefall has been felt across the crypto market which was already licking its wounds from recent declines.
Bitcoin was down a further 3.6% at the time of writing at $29,861, the first time it has dipped below $30,000 since December 2020. Ethereum was down 6.7% on Wednesday at $1,777.
The crypto price crash comes at a time of a broad downturn in financial markets and calls into question its ability to act as a diversifier.