Bitcoin Steady Around 39 Million KRW... Focus on Aftermath of Terra and Luna Incident

Luna at $0.005 in the US... Around 1,400 KRW Domestically

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Luna, a Korean cryptocurrency that once ranked in the top 10 by market capitalization, has shaken the global financial market, while the price of Bitcoin in the domestic market is stabilizing around 39 million KRW, absorbing the shock.

As of 8:55 PM on the 15th, the price of 1 Bitcoin on the cryptocurrency exchange Upbit was 39,912,000 KRW, down 0.13% compared to 24 hours earlier. At the same time, on Bithumb, it was trading at 39,884,000 KRW, up 3.19%.

Bitcoin fell below the 40 million KRW mark for the first time in about nine months on the 11th, and on the 12th, when the Luna-Terra crash became apparent, it dropped to 37 million KRW (based on Upbit).

Luna and Terra are cryptocurrencies issued by the blockchain company 'Terraform Labs,' founded by 30-year-old CEO Kwon Do-hyung, a former Apple engineer. TerraUSD (UST) was designed to peg the value of one coin at 1 US dollar.

However, recently, as the UST price fell below 1 dollar, its sister coin Luna plummeted, triggering a vicious cycle called the 'death spiral,' where UST fell further.

The stablecoin Terra (UST) is mostly backed by Luna. The collateral guaranteeing the value of the cryptocurrency is itself a cryptocurrency.

Until two weeks ago, Luna was trading in the 100,000 KRW range domestically and internationally but crashed over 99%, dropping to as low as 1 KRW on the 13th. Consequently, domestic exchanges such as Upbit, Gopax, and Bithumb, as well as some overseas exchanges, announced the delisting of Luna.

Upbit, Coinone, and Korbit suspended Luna deposits and withdrawals on the 13th. However, 'death swing' trading aiming for quick profits just before delisting is still ongoing.

As of the afternoon of the same day, Luna was trading around 0.78 KRW on Upbit's BTC market (cryptocurrency trading with Bitcoin), and around 0.4 KRW on Coinone and Korbit.

At a similar time, Luna was trading around 1,400 KRW on domestic exchanges Bithumb and Gopax. This is because these exchanges blocked deposits 1 to 2 days earlier than others, limiting the impact of the price crash.

Experts analyze that this massive crash occurred because the UST pegging system, which uses Luna as collateral, did not function properly.

According to this system, when the UST price falls below 1 dollar, UST is bought with Luna to reduce circulation and raise the UST price again. When UST price falls, the supply of Luna increases. Ultimately, if the UST price falls and Luna issuance increases, Luna's price inevitably falls as well.

According to a report from Korbit Research Center, on the 7th, a large volume of UST sell orders flooded in, causing a de-pegging phenomenon where the value fell below 1 dollar. To defend against this, a large amount of Luna was circulated, causing a price drop due to increased supply, which in turn caused the linked UST price to fall.