What We Could Learn From Luna Crash

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Luna is one of the native tokens of the Terra ecosystem. It’s sudden crash has been a very painful experience for the entire finance and crypto space. People across the financial world are devastated. A giant percentage of Luna believers had their life savings held in this cryptocurrency, and now they are left with nothing.

From ranking top 15 a few weeks ago based on the market cap, Terra Luna now is completely wiped out. This shocking flip in the project has happened and we could learn a lot from it.  Following are important lessons in parallel to what we also believe in that can be used moving forward particularly when there is financial turbulence.

1. Regulations Are Necessary for Digital Assets

The recent fallout of Luna could tell us that proper regulations may be needed to ensure that investors’ funds are safe and that they are only subject to minimum risks.

The May crisis is another proof that the real value and strength of tokens will be revealed in crisis moments.

If a coin or coin token manages to survive during these times, then it is really something you may consider for long-term investment.

2. Big Projects Can Fail

Luna failed and this also proves that all cryptocurrencies regardless of their market cap and growth level are subjected to high levels of risk. This further implies that Bitcoin and Ethereum can fail too. Don’t think they are too big to fail. Be ready of the possible risk!

Mike Novogratz, the billionaire founder of crypto asset management firm Galaxy Digit, urged future investors to risk only what they could afford if they want to avoid financial train wrecks of this sort.

3. Downturn Could Happen In A Matter of Hours

For example, UST is the algorithmic stablecoin of the Terra ecosystem. This implies that its value is algorithmically pegged to the US dollar. There is also a mint or burnt mechanism between LUNA and UST pairs.

During the market downtrend, this peg was broken, and therefore the UST value dropped to low values such as $0.4. Since the LUNA token’s value is significantly correlated to UST, it also did lose 90–95% of its value which happened in just a matter of hours.

The market might not offer you enough tine to close your assets. In times like this, you have to be super prepared. Yet, central exchanges including but not limited to Binance, Crypto.com, or Kraken have several tricks to not let the money go out of their exchange when crisis hits the market. Thus, use decentralized exchanges and utilize “stop loss” order with all of your assets.

4. The Real Value and Strengh of Digital Assets Can Be Seen In Times of Crisis

The May crisis proved to us that the real value and strength of tokens are going to be revealed when crisis hits the market.

If a coin or token manages to survive during these times, then it is really something you may want to consider for a long-term investment.

“The UST and Luna situation, along with the big recent BTC dips, are a clear example of how anything can go wrong in the volatile world of cryptocurrency. People need trustworthy financial services that are stable and won’t make people lose their entire life savings in 24 hours, ” Michael Kamerman, CEO of online trading platform Skilling, shared withThe Independent.

However, you must remember that what goes up must come down. So, it’s also wise to take temporary advantage along the way.

Always keep in mind that crypto industry is highly volatile and that there is no guarantee that it will not fail along the way.

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