Investment Sentiment Shrinks After Luna Incident... 'Extreme Fear'

[Image source=Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] Since the Luna crash incident, investment sentiment toward cryptocurrencies has struggled to recover.

According to cryptocurrency data provider Alternative on the 29th, the Fear & Greed Index, which indicates investment sentiment, rose by 1 point from the previous day to 14 points (extreme fear). Alternative's Fear & Greed Index ranges from 0 points, indicating extreme fear and pessimism toward investment, to 100 points, indicating optimism.

The sharp deterioration in investment sentiment is largely due to the Luna incident. Alternative's Fear & Greed Index recorded 23 points as of the 7th of this month but dropped to 18 points on the 8th and 11 points on the 9th. On the 17th, it recorded the lowest point in May at 8 points. According to the global cryptocurrency market tracking site CoinMarketCap, Luna's price, which was in the $60?70 range until the 8th, fell to the $50 range on the 9th and dropped below $1 starting from the 12th. Additionally, the price of the representative cryptocurrency Bitcoin recorded $34,000 on the 8th but plunged to the $26,000 range on the 12th. As of 3:32 PM on the day, it was $28,996 (approximately 36.42 million KRW), up 0.51% from the previous day.

The massive crash occurred after the price of TerraUSD (UST), a stablecoin designed to be pegged to $1, plummeted, causing the price of its sister coin Luna to fall as well. Unlike other stablecoins backed by safe assets such as cash or government bonds, UST maintained its value through an algorithm linked to Luna.

Looking at the Digital Asset Fear & Greed Index by Dunamu, which operates the domestic cryptocurrency exchange Upbit, investment sentiment remains subdued. The index was 33.58 (fear) on the day, up 0.66 from 32.92 (fear) the previous day but down 0.93 from 34.51 (fear) on the 22nd of this month, a week earlier. Compared to 45.57 (neutral) on the 29th of last month, it dropped by 11.98 points. Dunamu's Digital Asset Fear & Greed Index is classified into five levels: 'Extreme Fear (0?20)', 'Fear (20?40)', 'Neutral (40?60)', 'Greed (60?80)', and 'Extreme Greed (80?100)'. Movement toward extreme fear indicates decreasing investment sentiment, while the opposite indicates a revival of investment sentiment.