Its market cap last week was 18 billion, and it'll probably reach 0 in a day or two

Its complementary coin, TerraLuna, which can usually be exchanged for Terra, is down 97%

:brrrrrrrrrrrr: :stonks-down:

  • KiaKaha [he/him]
    ·
    2 years ago

    Lemme see if I’ve got this right:

    • 1 Terra can be transformed into 1USD worth of Luna.
    • 1USD worth of Luna can be transformed into 1 Terra.
    • The incentive to hold Terra is to use as a currency.
    • The incentive to hold Luna is to get fees from when Terra is used as currency.
    • Therefore, if Terra is in high demand and is worth more than 1USD, Luna holders can make money by transforming 1USD of Luna into more than 1USD of Terra, increasing the supply of Terra and stabilising the price of Terra at 1USD.
    • Conversely, if Terra is worth less than 1USD, Terra holders can make money by converting into 1USD worth of Luna, increasing the supply of Luna, reducing the supply of Terra, and stabilising the price of Terra at 1USD.
    • If the price of Terra remains less than 1USD, people will continue to convert to 1USD worth of Luna, massively increasing the supply of Luna and devaluing the currency.
    • Faced with an exodus of Terra holders, Luna holders have no prospects of fee payments, and see their currency devaluing due to supply, so they sell for USD.
    • Seeing the dumpster fire that is Terra and Luna, no USD holder wants to buy either, placing further downward pressure on Terra, encouraging more Luna to be created, further diluting the Luna currency.

    Is that right?