WallStreetBets, the Reddit community which took the financial world by storm when they pumped GameStop up to the stratosphere in January 2021, alongside other meme-stocks such as AMC, may have a new target.
The community have turned their attention to Luna, the cryptocurrency which at one point was worth $42 billion, trading at $119 per coin, before a death spiral to where it currently trades at 1 cent. Invezz.com wrote an article yesterday digging into the entire saga, but in short, there was a run on the bank for its stablecoin UST. This mass panic and exodus caused the $1 peg to slip, and shortly after Luna collapsed, dropping 99.5%.
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There are parallels to the Luna situation and Gamestop’s run last year. The Luna run, while not confirmed, is speculated to be the result of a large attack on the network, by either a hedge fund or other large institutional player. Gamestop, of course, was the most shorted stock on the market in January 2021, when WallStreetBets took hold of it and bought it in such volumes that an almighty short squeeze occurred. Melvin Capital, for example, lost 50% in January 2021 – a result which was seen as a mighty victory for the ritual investor against Wall Street.
With suspicions that hedge funds or other institutions caused Luna to collapse, this is essentially the same thing – although retail investors are very much the losers. Investors who held Luna have lost everything, while many were using the Anchor protocol, a crypto version of a savings account, to earn yield on UST – which was believed to be anchored to the dollar.
Instead, UST lost its peg and everything connected to the Terra ecosystem was obliterated. A $100 investment now would buy the same amount of Luna coins that $1.2 million would have bought at the peak one month ago.
As for the meme angle, it is very easy to imagine a narrative developing here quite quickly. Luna has shed its main use – if UST restores its peg, founder Do Kwon has intimated that he will collateralise it, hence meaning Luna, which was previously used to algorithmically keep UST’s peg at $1, would no longer have this utility.
But traders could flock to the nearly-dead token to own a piece of financial history, or try to inflate its price back up to help recover some losses which retail investors took in the last couple of days. The below poll is drawn from the WallStreetBets telegram group, traditionally the place where cryptocurrency investors gather to discuss coins.
If Terra is dead – and the word is still that Do Kwon and company are trying to revive it – the community could still bond together to maintain the blockchain as a meme or relic of this dark chapter in cryptocurrency.
Stranger things have happened.
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