Digital AssetsThe dramatic crash of Terra Luna, ranked among the top 10 most valuable cryptocurrencies, has wreaked havoc in the lives of investors who feared they would become homeless after the crypto mayhem. Terra was once ranked among the top 10 most valuable cryptocurrencies. It dropped below US$1, having peaked close to US$120 last month, reports the Independent. Digital assets last week netted their highest inflows since late 2021 as investors bought into the market panic caused by Terra's implosion. Crypto funds racked up US$274 million in inflows in the week through May 13, when the terraUSD stablecoin (UST) a cryptocurrency that's supposed to trade at a fixed price of US$1 dropped to a few cents, wiping out most of its US$18 billion market capitalization and also making the blockchain's native token LUNA, once a top 10 cryptocurrency, virtually worthless.

It's worse for Luna holders. The value of Luna tokens has almost completely disappeared: After reaching a high of just under US$120 in April, Luna's current price is a fraction of a penny. To that effect, Cronos (CRO) changed hands for US$0.38 two months ago and on May 16, 2022, CRO traded for US$0.19 per coin. Cosmos (ATOM) traded for US$28.95 per unit on March 7, and today a single ATOM trades for US$11.27 per coin. While LUNA was the top Cosmos-based token two months ago, today the largest Cosmos ecosystem token market cap is held by CRO with its market cap around US$4.95 billion on Monday.

The provider of the largest bitcoin exchange-traded fund listed in Canada, booked US$284 million in inflows, dwarfing flows of competitors. Non-bitcoin funds struggled in the market sell-off, as some US$26.7 million flowed out of funds managing ether (ETH), while vehicles focused on Solana (SOL) recorded $5 million of outflows.

Investors in blockchain-related stocks panicked, with some US$51 million leaving funds that manage blockchain and crypto-focused equities. In contrast, multi-asset funds, which manage more than one cryptocurrency, recorded US$8.6 million in inflows, suggesting that some investors preferred a diversified approach.

But UST’s crash put another dent in the overall market, most centrally because Terra creator Do Kwon had bought billions worth in Bitcoin as a safeguard for UST. When he and the Luna Foundation Guard deployed more than $3 billion to defend the peg, in doing so he caused downward pressure on the market, causing other large investors to sell off their Bitcoin shares. Bitcoin hit its lowest point since December 2020, and Kwon’s ploy to save UST was unsuccessful. 

The ripple effects were felt throughout the crypto ecosystem. Because firms sold around US$30,000 of Ether in their own attempt to defend UST’s peg, Ether also plunged below US$2000 for the first time since July 2021. As many investors tried to cash out their Ethereum-based stablecoins, their sheer number of transactions caused Ethereum’s transaction fees to spike, causing people to forfeit even more money.