"Due to Luna"... Cryptocurrency Assets Under Management Drop 28% in May

Bitcoin Drops 26.8%
Ethereum Plummets 33.9%
Luna Crash and Macroeconomic Uncertainty
Trigger Massive Cryptocurrency Sell-Off

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] It has been identified that the assets under management (AUM) of digital asset investment products decreased by about 30% last month following the Luna Classic and TerraUSD (UST) crash incidents.

According to CryptoCompare, a UK-based cryptocurrency data analysis firm, from May 1 to 26 this year, the AUM of digital asset investment products was $34.2 billion (approximately 43.0065 trillion KRW), down 28.6% compared to the previous month.

By category, the largest portion was Bitcoin-related assets under management, which decreased by 26.8% from the previous month to $24 billion. However, the proportion of Bitcoin-related assets increased from 68.1% in April to 70.1% in May, likely because investors flocked to Bitcoin, a relatively safe asset. Ethereum-related assets, which hold the next largest share after Bitcoin, recorded a larger decline, dropping 33.9%.

The AUM of digital asset investment products has been declining since December last year. In October last year, when cryptocurrency investment was booming, it reached a peak of $74.7 billion (approximately 93.7485 trillion KRW), up 45.5% from the previous month, and recorded $70 billion in November. However, in December, it decreased by 16.5% from the previous month to $57.6 billion. In January this year, it further dropped 25.1% to $43.9 billion, then showed a slight increase in February and March, but declined again in April. This is believed to be due to the downward trend in Bitcoin prices since November last year when it reached the $66,000 range, along with factors dampening investment sentiment such as the US Federal Reserve's interest rate hikes.

In this context, the Luna Classic incident led to a sharp decline in the AUM of digital asset investment products in May. When the price of UST, a stablecoin designed to be pegged to $1, plummeted, the price of the existing coin Luna Classic also crashed. Unlike other stablecoins backed by safe assets such as cash or government bonds, UST maintained its value through an algorithm linked to Luna.

CryptoCompare analyzed, "The Luna token supporting the algorithmic stablecoin UST plummeted to below 1 cent within hours, wiping out billions of dollars," and added, "These events, combined with negative macroeconomic factors, triggered massive sell-offs."

Meanwhile, by asset management company, the US cryptocurrency investment firm Grayscale was identified as having the largest AUM. In May, Grayscale's AUM was $25.7 billion (approximately 32.2535 trillion KRW), accounting for 75.3% of the total. Following were Sweden's XBT Provider and Switzerland's 21Shares, with $2.11 billion (approximately 2.6355 trillion KRW, 6.18%) and $1.21 billion (approximately 1.5186 trillion KRW, 3.53%), respectively.