Cryptocurrency has been a huge trend lately, but this week it came to an abrupt halt with two separate coins crashing out of the market due to unknown reasons. While there were certainly speculations as to why this happened, there wasn’t any clear reason known from either coin’s development team. So what exactly caused these coins to crash? And are we looking at the beginning of a cryptocurrency crash? Read on to find out!
Major events leading up to crash:
The price of Luna and TerraUSD have been plummeting, causing panic on all cryptocurrency markets. The problems are made even worse by news that a group of prominent investors were duped into purchasing fake coins as part of an elaborate international scam. Our community member CoinSparky explains what happened in his analysis report below. Before we dive into his report, let’s take a look at how things got to where they are today
As you can see from CoinSparky’s full breakdown below, there was quite a bit going on over the past month or so before these two cryptocurrency currencies crashed. But why did they crash now?
For some perspective, I talked with our resident cypto analyst Matias to get some further insights into our market here at Lunyr HQ. Matias is based out of Argentina but covers all relevant aspects of crypto around Latin America, so he brings a regional perspective to our team — plus he has an encyclopedic knowledge of cryptocurrency worldwide! Here’s his breakdown… So what happened? (Matias)
There are many reasons for these crashes that have been happening in recent weeks. It started with the decision by Google to ban ICO ads in their search engine results pages (SERPs). This made ICOs harder to find for potential investors and drove down demand. Then we had several high-profile scams like Bitconnect, Prodeum, Verge etc which hurt investor confidence even more. All of that led us up to one big thing: Coin base added Bitcoin Cash last December which was great news for BCH holders because BCH spiked hard after Coinbase listed them. Many people were expecting Coinbase would add other coins as well – especially Ethereum Classic (ETC) due to its technical similarities with BCH. However, Coinbase decided not to list ETC which caused a lot of FUD and panic selling. That ended up being enough to break ETC’s support level at $14.50 and lead to another massive selloff. To make matters worse, Binance followed suit by announcing they will be delisting ETC too which triggered more panic selling across all markets including BTC/USDT markets where Luna/TerraUSDT is traded. The final nail in the coffin came when Poloniex announced they will be delisting 6 assets including Luna/TerraUSD on April 15th – just 2 days away from today.
Analysis of current market situation:
The cryptocurrency situation in the market in not too good right now. BTC and Ethereum, both are goingand some other altcoins like Solana, cardano and dodge coins are going down and their situation is even worse.This is very bad news for cryptocurrency investors. It’s been two days since one of our favorite stablecoins, Luna, has crashed 60% from $0.24 to $0.12 in less than 24 hours after being listed on Binance. This caused a domino effect with all USDT markets crashing down -20%. Why is that? What is going on with these coins and why are they so volatile when crypto markets are currently at their most stable period ever? Let’s find out!
Binance allows cryptocurrency listing regularly. Last month alone, Binance added 59 different tokens, causing quite a few price swings along with it. Before any coin can be officially listed on binance, they need to get past Binance’s strict due diligence process consisting of seven rounds of technical assessment via questionnaire answers and security reviews by third-party firms to ensure their network design provides users with immutable ownership rights through blockchain technology, ensuring that your funds are secure. Any applicants who fall short in even just one category will not move onto subsequent rounds of review. Once passed all 7 rounds, applicants must pass an initial pre-listing audit before being allowed to list on Binance. This is where things went wrong…
The applicant behind Luna cryptocurrency was able to pass all 7 stages without a hitch (or so we thought). It turns out that Luna had been lying about passing its pre-listing audit. This caused many investors and traders to lose trust in Luna when it was finally listed because there were many questions raised about how exactly such an error could have happened during a rigorous pre-listing audit process. The community has been quick to react, calling for an investigation into what happened and demanding answers from both Luna’s team as well as from Binance itself.
Next steps for the company:
This will determine how deep a hole you need to climb out of in order to restore confidence in investors. As many a venture capitalist has said, once you lose your reputation, you can never get it back. Whether or not your product is highly trusted by consumers, if you’ve lost investor trust, no amount of funding will fill that hole.
For Luna and Terra investors who are still confident in their investment portfolio, there’s time to wait for a recovery—but for everyone else: don’t be surprised if this is one of those get-in-when-you-can opportunities because the end could come very quickly. While some may argue that cryptocurrency prices fluctuate rapidly regardless of external forces, what happened to Luna and Terra shows just how devastating things can get when people start questioning an idea or company’s ability to succeed.
Investors were rattled and questions were raised, leaving no choice but for managers to answer them immediately. If they didn’t know exactly what was going on at all times (and couldn’t prove it), people would have begun dumping their coins at any price they could find; only after concrete answers were provided did investors begin considering buying again (although at a much lower price). It took just one bad day before panic set in; imagine what would happen if something like that happened over several days instead? The effect on consumer confidence would be catastrophic. And as we’ve seen with other cryptocurrencies, especially Bitcoin, past performance doesn’t guarantee future results.
If something similar happens to another cryptocurrency like Bitcoin down the road, users might take notice of companies like Luna and realize they’re better off sticking with safer investments. Then again, maybe such a thing won’t ever happen… either way, it’s worth watching closely. It’s easy to see why crypto enthusiasts consider these two events extremely significant—and why non-cryptocurrency enthusiasts should too!