Luna's collapse has brought down the entire decentralised economy
Good morning Lions oh wow! what a day we have on our hands so many questions and not many answers as Do Kwon parachutes himself to public enemy number one.
This is quite the market collapse will we see Luna recover? maybe, maybe not but I want to look a little deeper than that to see the broader economic damage Luna has caused beyond it's own network.
I think a core issue that has led us here today is the Luna Foundation Guards decision to back UST with Bitcoin which I recently wrote about as being a bad idea. Backing one volitile asset with another was never going to end well and LFG should have backed Luna not UST with real world assets like precious metals or fiat.
Most depegs and crashes occur during a market crash so Luna selling Bitcoin to stabalise UST is bringing the market further down far beyond just the Luna ecosystem. As UST was growing in popularity and many tokens were paired with it it further brought many of the other tokens down with it.
Sadly this event is no where near over and can rapidly get worse due to UST's rapid growth, widespread adoption and it's Bitcoin reserves dumping.
Even once UST repegs another catalystic event could potentially occur once all those buying UST unpegged sell to make a profit as it repegs sending the entire blockchain ecosystem on another death spiral.
It's going to take a lot to get us out of this one.
Heavy Heart for the Luna Projects
We can't talk about the crash without extending our thoughts to those who have spent months building and developing projects on Luna only to awake to their projects rapidly declining and turning to dust. As someone who has slowly been working on my own project I know the hours of operation and own money spent and like many, much of my project has turned to dust. Ontop of my own investments in Luna....
This is a monumental crash, one that won't be easily forgetten and despite Do Kwon's reassurance that he will rebuild there is another aspect that requires careful consideration. Customers, will he have the investors to support his endevours?
Only time will tell.
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This is not financial advice and readers are advised to undertake their own research or seek professional financial services