After UST, the Terra stablecoin, and LUNA fell beyond holders’ belief, AVAX holders started selling off their tokens for fear of being victims of a drop in AVAX’s market price. The sell-off of AVAX tokens lead to a 35% drop in the token’s price.
AVAX Prices Dropped by 35%
AVAX prices are following LUNA because it’s part of the collateral securities used to support UST, which has been unpegged from the USD since stablecoin by Terra was launched earlier this year. As a result of the UST’s decoupling from the USD, its price has become volatile.
AVAX is presently falling, pushing the LFG, a Singapore-based non-profit sponsored by TerraLabs, to liquidate its cryptocurrency reserves to assist the stablecoin’s return to its $1 value. It puts AVAX in a difficult position because it’s part of the primary sponsors of UST, which could lead to a big sell-off.
Avalanche tokens’ price has plummeted by over 35% in the last several days. AVAX is trading at $31.39, dropped 36.28% from its peak of $50.09 for the day. This decline parallels UST’s, which has dropped by over 86%.
It’s worth noting that the UST de-pegged from the USD, notwithstanding LFG’s efforts to deplete its cryptocurrency reserves to keep the UST pegged. The LFG now possesses 1.97M AVAX valued at $74.75M.
Avax Modest Support Attempt by Avalanche Bulls
This morning’s AVAX bulls did everything to keep ADA from falling below $36. Still, they only managed to assist the token in recouping approximately 22% of its decrease, with its value rising from $32.50 to more than $39.50 before recovering its losses to $31.39.
This coin is trying to get back on track, but it’s running into headwinds from the low-buying attitude in the cryptocurrency caused by the massive interest rate ecosystem. As a result, the AVAX/USD pair might retest the $36 level as security for the meltdown move, resulting in a $20 market risk for the pair.
Why are the Prices of LUNA and UST Falling?
Luna and UST are clearly under massive selling pressure. Cryptocurrency appears to be the target of a coordinated onslaught. Luna’s stablecoin structure allows each UST to be exchanged for one dollar worth of LUNA, making it easy for individuals new to the system.
Whales and crypto traders are taking advantage of the depegged UST/LUNA exchange rate to make money by buying UST at a bargain, turning it to LUNA, and then selling the LUNA back on an exchange. Numerous exchanges took steps to help the market by limiting arbitrage options and slowing the sell-off for LUNA and its stablecoin. Binance, for instance, briefly halted Terra Network withdrawals.
Furthermore, several traders claim that KuCoin’s LUNA withdrawals and deposits were severely overburdened, resulting in cash being stranded in limbo. KuCoin has yet to provide a formal statement concerning the suspension of UST and LUNA withdrawals and deposits.