The cryptocurrency market continues to decline after, at the beginning of May, several factors resulted in sharp falls in its valuation: the so-called ‘crypto crash’.
Although the global economic context was blamed as one of the causes, the implosion of the Terra-Luna ecosystem was the symbol of a fall that for some .
Led by , Terra’s proposal was based on a stablecoin (UST) that lost its parity with the dollar, and a token (Luna), this one, with an oscillating value, which went from being worth 120 dollars to 0 in a matter of hours. A house of cards branded for many as that took the investments of many along the way.
Well, Do Kwon is back, and the only stable thing is the controversy. Luna 2.0 (now with no associated stablecoin) the debate over who is really in charge of protecting consumers from buying ill-advised projects, and whether states should directly intervene.
The fear of a new debacle
In the absence of strict regulations, cryptocurrency exchanges are the de facto guardians of the sector, since they choose the tokens that are included in the market. Two of the most important, Binance and Kraken, have already accepted Luna 2.0, having to go out and justify it as they go.
Jesse Powell, CEO of Kraken, took to Twitter on Sunday to defend the inclusion of the new Luna on his platform, citing customer demand as the main justification. “There’s a weird dynamic with exchanges,” he said, adding that customers will often take their business elsewhere if they can’t access all the assets or services in one place. And he clarified that including it is not supporting it: “The list does not mean support.”
After plummeting 80% from its debut price of $17.80 on Saturday, investors seem to have rushed to support the replacement crypto, driving the price of Luna 2.0 up 97% from its bottom of $6.15 to a high of $11.97 on Monday, according to CoinMarketCap. The price spike came hours before Luna 2.0 debuted on the world’s largest cryptocurrency exchange, Binance.
Binance listed Luna 2.0 by registering the token in its Innovation Zone, which is a space for coins that “pose higher risk than other tokens.” After rising during its first hours, Luna 2.0 has fallen again to 6.93 dollars this Wednesday.
All of this comes after Terraform Labs announced on May 25 that it would launch a new version of the Terra blockchain backed by a new currency, Luna 2.0, following a majority vote of Luna token holders. The new blockchain would not have an associated stablecoin.
The old currencies -Luna and UST- will continue to exist as Luna Classic and TerraClassicUSD. Both are trading at significant losses, with TerraClassic USD trading at $0.02, while Luna Classic is trading at one-hundredth of a cent, according to CoinMarketCap.
Binance was an early investor in Terraform Labs, the creator of the Luna and UST coins, leading a $32 million funding round in 2018. Zhao claimed that the exchange invested only $3 million in Terra and was not involved in subsequent funding rounds, but that linkage makes many see potential conflicts of interest that have made a failed project available again.
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