Why Terra Luna Crypto Crushed Recently? Can Terra Luna Recovery? Everyone is talking about the crypto bear market. It feels like we are one step closer to a market crash with every dip. If you’re investing in crypto and watching the value of your portfolio fluctuate, you might be wondering if there will ever be a time when things stabilize and the value of your holdings goes up instead of down. The answer is yes. There will be a time when things get better for crypto investors once again, but that doesn’t mean we aren’t in for some rough times ahead. The cryptocurrency market crash has come sooner than expected. Even so, it doesn’t change the fact that this is an exciting space to invest in right now and there will be great opportunities to reinvest once things recover from this downturn. Whether you are just starting with crypto or have been investing for a while now, here are some tips on how to handle this bear market
Why Terra Luna Crypto Crushed Recently?
Last week the crypto market experienced what can only be described as the blackest of Black Swan events to date. This was the total collapse of terra which saw over $40 billion lost in a matter of days. Those who held terra Luna or UST stable coin effectively saw those holdings reduced to zero. For anyone reading who is affected in such a way I have two things to say, first and foremost money can always be made back no matter how bad your financial situation might be. Second thing is that if the terra situation has taken your mind to a dark place please consider reaching out to those who can offer support.
So what the hell happened? Can Terra Luna Recovery?
Nobody knows for sure at least not yet the situation is evolving information is still coming out. What we think happened is you need to be familiar with the terra mint and burn mechanism for stable coins specifically UST eh decentralized stable coin that was once pegged to the US dollar. Minting one UST required burning $1.00 worth of terra (Luna) and vice versa, so if you had one luna and was worth $10 you could burn it to mint 10 UST, conversely if you had 10 UST you could burn it to mint one luna. Assuming terra (luna) was trading at $10 if UST was trading at say $1.50 this created the incentive for Luna holders to burn their coins to mint UST and instantly make a 50% profit for selling UST. This increased UST circulating supply and sell pressure restored UST’s $1 peg the same process worked in reverse. Now when the crypto markets were going up terrace mint and bone mechanism worked quite well because luna’s price was going up with the rest of the crypto market along with the demand for stable coins such as UST. When the crypto markets dipped terra burn mechanism didn’t work so luna’s price started to go down along with the demand for stable coins. Logically they had to sell that Luna for something else right away to get their dollar back when Luna was crashing. This caused Luna to crash, even more, the result was something called a death spiral which has been the unfortunate fate for many algorithmic stable coins.
How to avoid this? Crypto Diversification
The single biggest mistake people make during a bear market is holding too many of their assets in one sector. When one market is down, it’s very common for others to follow, so you want to diversify your holdings across a variety of sectors to protect your portfolio against losses. You don’t want all your eggs in one basket, so to speak. Be sure to diversify across different regions and industries. For example, you might want to put some money into stocks, bonds, commodities, real estate, and even gold or silver. You don’t have to put all your money into crypto. Crypto is a really exciting space to invest in, but it’s risky and volatile. Some countries are banned from trading crypto because of security concerns, so diversifying your holdings can help ensure you don’t lose everything if one sector tanks.
Rebuilding Your crypto Losses
If you’ve experienced bearish losses, the best thing you can do is start rebuilding your holdings. You have a couple of options here. You can either start by investing the same amount of money (or more) that you previously were investing, or you can start with a smaller amount and work your way up again. If you were investing $1,000 per month, start investing that $1,000 again as soon as you can. If you were investing a smaller amount, such as $100 per month, start with investing $200 per month until you are back to where you were before. Even if you don’t start investing again until the crypto market fully recovers, you’ll still come out ahead.
HODL and Learn
HODL (“hold”) and learn. Bear markets are great times to learn about investing in general and about crypto in specific. There are tons of online investing/trading courses to take, books to read, and information to consume to make sure you are doing everything you can to make the most of your portfolio. If you have been investing in crypto for a while, you’ve probably noticed that it’s not a get-rich-quick scheme. It’s a long-term investing strategy that requires patience. If you’re new to crypto investing, think of this as your “paying your dues” period. You’ll likely experience some losses at first. That’s part of the process. You can’t expect to be successful at anything without putting in the work to get there.
Watch Closely For New Cryptocurrency Opportunities
As soon as the crypto market starts to show signs of recovery, you’ll want to be watching closely for new opportunities to invest in new projects that could be the next big thing. When the market is booming, it’s easy to get caught up in the hype and try to make unrealistic gains. Make sure you are investing in legitimate projects with a realistic growth plan. Keep an eye on regulatory changes for your region. Some countries have made it illegal for citizens to invest in certain types of crypto, so be sure to do your research and find out what’s available to you. Watch the news and follow industry influencers closely to stay up to date on the latest news and developments in the crypto world.
The bear market will pass, and when it does, those who prepared for it and stayed the course will be in a great position to profit from their crypto investments. While it’s important to stay informed and cautious during the bear market, it’s also important not to let it keep you from investing altogether. You can minimize your risks by diversifying your holdings, keeping your eye out for new opportunities, and HODLing until the market starts recovering.
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