LUNA and LUNC: Risk Warning in the Crypto World
#新币挖矿&盘前交易USUAL
The LUNA project and its related token LUNC (also known as Terra Classic) have now become a big mine in the cryptocurrency circle, showing how quickly those ambitious projects can collapse. The LUNA incident taught us a lesson, telling us that crypto investment is risky and which pitfalls should not be stepped on.
What are LUNA and Terra?
LUNA is in the same group as the Terra platform, which is an ecosystem for stablecoins. There is a main token called UST, which is said to be pegged to the US dollar, but in fact, the price is adjusted by algorithms and LUNA, and there is no real gold and silver reserve.
So why did it go wrong?
Algorithm peg is unreliable
UST is supported by algorithms and LUNA, but once it encounters a large-scale sell-off, it can no longer maintain the peg, and the price plummets.
Panic and hyperinflation
Once UST falls, LUNA has to be issued in large quantities to maintain the system, and as a result, LUNA itself is almost worthless. Investors lost a lot of money, and the project's reputation was ruined.
So what lessons should investors learn?
Don't touch too complicated mechanisms
The UST incident tells us that algorithm-linked stablecoins are unreliable. Before investing, you have to think carefully about whether the project is stable and whether the mechanism is reliable.
Actual reserves are the key
Only projects with real assets are stable. Terra lacked reserves, and it ended up failing.
Panic can make the situation worse
In the crypto circle, market sentiment can directly affect the stability of a project, especially when something goes wrong.
After LUNA collapsed, although a new token LUNC was released, everyone's trust in this project still cannot be restored. The LUNA/LUNC incident tells us that when choosing crypto assets, we must analyze carefully and be cautious.
