Un-stable coin? Terra crypto woes continue with another 31% fall

I'd think very carefully before going bargain hunting among stumbling altcoins.

A man sitting at a computer is blown away by what he's seeing on the screen, hair and tie whooshing back as he screams argh in panic.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Terra crypto woes aren't over as UST falls another 31%
  • Terra's LUNA token is down 99.99% since last month
  • Only three altcoins have shown any staying power in terms of maintaining their market valuations

Terra crypto woes aren't over yet.

Bargain hunters take note.

The now decidedly un-stable coin, TerraUSD (CRYPTO: UST), plunged another 31% over the past 24 hours to 9 US cents. This comes amid a wider sell-off in cryptos following the biggest drop in US markets in almost two years yesterday (overnight Aussie time).

What's happening with Terra's cryptos?

We first penned an article on Terra's plunge last Thursday. At that time the algorithmic stablecoin intended to be pegged to the US dollar had tanked some 70% and was trading for 30 US cents.

With the latest fall, Terra's stablecoin is now down 90% since this time last week.

Investors holding Terra (CRYPTO: LUNA) are out far more.

LUNA – a top 10 crypto by market cap before its demise – is the token that was intended to help UST maintain its dollar peg. The idea being that investors could swap one UST for US$1 worth of LUNA at any time.

That worked well. Until it didn't.

It was only last month, on 5 April, that Luna hit record-highs of US$119.18, according to data from CoinMarketCap.

Last Thursday it plunged to US$1.05.

Today, Terra's LUNA crypto is trading for 0.01462 US cents. That's down another 22% over the past 24 hours and down essentially 100% from last month's all-time highs.

While there's no single factor that's led to the collapse of Terra's cryptos, a large driver appears to be a lack of confidence. Once investors lost confidence in the US dollar peg and began to sell, the token continued to spiral lower.

Beware the hype cycle

Both the Terra crypto offerings were once ranked among the top-10 by market valuation.

But Brent Donnelly, president of Spectra Markets, has some words of caution for investors buying into the hype that often surrounds new and fast-rising altcoins.

According to Donnelly (quoted by Bloomberg):

Every altcoin, regardless of its true promise, has an amazing hype, narrative, and origin story when it's running higher. Every coin has a marketing department, religious adherents, and a cool story. But very few remain relevant once the primary hype cycle wanes.

Donnelly adds that only four cryptos have shown any staying power in terms of maintaining their market valuations.

"Bitcoin, Ripple, Doge, and Litecoin are the only cryptocurrencies that were in the top 15 by market cap in both 2015 and now," he said.

"Coins cycle in and out. That's why all the altcoin charts look like mountains. Altcoins are lotto tickets that only pay off if you take profit before they collapse."

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Terra. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cryptocurrencies

A man with his head on his head because of the falling cryptocurrency prices on the screen.
Cryptocurrencies

What's happening with the Bitcoin price amid the stock market volatility?

Bitcoin investors have been on a wild ride in August.

Read more »

bitcoin coins falling
Cryptocurrencies

Think the ASX has been volatile this week? Wait until you see the Bitcoin price

Bitcoin has had the volatility of a yo-yo over the past week...

Read more »

A businessman carrying a briefcase looks at a square peg or block sinking into a round hole.
Technology Shares

Is this the real reason Block stock is down 11% in a week?

Block's big drop this week might have an unusual culprit...

Read more »

Bitcoin ETF digital illustration.
Cryptocurrencies

Bitcoin ETF hits the ASX. Here's what you need to know

History is being written on the ASX today as it welcomes its first Bitcoin ETF.

Read more »

Concept image of Bitcoin and hand using laptop.
Cryptocurrencies

Buying Bitcoin? Here's why Block's Jack Dorsey says AI will drive global adoption

Moving forward, Block plans to reinvest some of its monthly profits into Bitcoin.

Read more »

A man holding a mobile phone walks past some buildings
Cryptocurrencies

The Betashares Crypto Innovators ETF (CRYP) is up 37% in a month. Is it too late to buy?

Looking at the CRYP ETF? Here's my take on whether it's too late to buy.

Read more »

Bitcoin ETF digital illustration.
ETFs

Why is the BetaShares Crypto Innovators ETF (CRYP) surging on Thursday?

Some massive Bitcoin news is lifting this ETF today.

Read more »

A woman holds a bitcoin token in her hand as she smiles at the camera in the background.
Cryptocurrencies

Bitcoin ETF approved. When is it coming to Australia?

Crypto bulls will be celebrating this milestone moment.

Read more »