Weekly crypto roundup: Luna crashes to $0 as UST falls further from dollar peg

In today’s edition of Bitmama’s weekly crypto news roundup, we cover interesting developments in the cryptocurrency industry. Top picks – Cryptocurrency luna crashes to $0 as UST falls further from dollar peg, More than $200 billion wiped off from crypto market in a day, Nigeria upgrades CBDC as crypto restrictions cripple fintech industry, Emirates airline to accept Bitcoin payments, embrace NFTs and the Metaverse.

Let’s get started.

Luna crashes to $0 as UST falls further from dollar peg

Cryptocurrency luna- the sister token of controversial stablecoin TerraUSD is now basically worthless. Luna plunged to $0 Friday, according to data from CoinGecko, marking a stunning collapse for a cryptocurrency that at one point was worth more than $100. The demise of controversial stablecoin venture Terra has resulted in a meltdown in the crypto market, which erased billions of dollars in value in a single day.

TerraUSD or UST, is supposed to be pegged one-to-one with the U.S. dollar. UST has however lost its peg and on Friday was trading at around 12 cents, according to data from CoinGecko.

Bitcoin staged a rebound on Friday, jumping above $30,000 despite the ongoing woes of stablecoin TerraUSD which has caused panic in the crypto market. Investors likely took some comfort from news that tether, the world’s biggest stablecoin, had regained its dollar peg after declining below $1 for several hours.

UST and Luna are linked. UST is dubbed an algorithmic stablecoin meaning its $1 peg is supposed to be governed by underlying code. That is fundamentally different to other stablecoins like tether and USDC which are backed by real-world assets such as bonds. UST has no real-world reserves.

The UST algorithm works through a complex system of minting and burning tokens to maintain price stability. A UST token is created by destroying some of the related cryptocurrency luna to maintain the dollar peg. But the extreme market volatility has put UST to the test and it has been unable to maintain the peg.

Adding further complications is the fact that the Terra blockchain which underpins UST and luna stopped processing transactions twice in less than 24 hours.

More than $200 billion wiped off from crypto market in a day

Bitcoin fell below $26,000 for the first time in 16 months, amid a broader sell-off in cryptocurrencies that erased more than $200 billion from the entire market in a single day.

The price of bitcoin plunged as low as $25,401.29 on Thursday, according to Coin Metrics. That marks the first time the cryptocurrency has sunk below the $26,000 level since Dec. 26, 2020. Bitcoin has since pared its losses and was last trading at $28,569.25, down 2.9%.

Ether, the second-biggest digital currency, tanked to as low as $1,704.05 per coin. It’s the first time the token has fallen beneath the $2,000 mark since June 2021. Ether recently went down by 8.8% to a price of $1,937.88.

Investors are fleeing from cryptocurrencies at a time when stock markets have plunged from the highs of the coronavirus pandemic on fears over soaring prices and a deteriorating economic outlook. U.S. inflation data out Wednesday showed prices for goods and services jumping 8.3% in April, higher than expected by analysts and close to the highest level in 40 years.

Also weighing on traders’ minds is the downfall of embattled stablecoin protocol Terra. TerraUSD, or UST, is supposed to mirror the value of the dollar. But it plummeted to less than 30 cents Wednesday, shaking investors’ confidence in the so-called decentralized finance space.

Stablecoins are like the bank accounts of the barely regulated crypto world. Digital currency investors often turn to them for safety in times of volatility in the markets. But UST, an “algorithmic” stablecoin that’s underpinned by code rather than cash held in a reserve, has struggled to maintain a stable value as holders bolted for the exits en masse.

Nigeria upgrades CBDC as crypto restrictions cripple fintech industry

Nigeria’s central bank has upgraded its eNaira to steer the country away from crypto even after a UN report stated that restrictions on digital currencies are stifling the nation’s fintech sector.

The Central Bank of Nigeria (CBN) is moving ahead with plans to upgrade the country’s central bank digital currency (CBDC) to be used on a wider range of goods and services. It is also maintaining harsh crypto restrictions that cripple the country’s fintech sector.

The CBN branch controller Bariboloka Koyor spoke at a campaign aiming to “sensitize” businesses to the eNaira at a market in the country’s most populous city of Lagos on Monday, according to a report from Vanguard. Koyor stated:

“Starting from next week, there is going to be an upgrade on the eNaira speed wallet app that will allow you to do transactions such as paying for DSTV or electric bills or even paying for flight tickets.”

Koyor said the upgrade was launched to make onboarding easier, touting its wallet that had no charges and was faster than internet banking. He added that in the future, the eNaira will be the only way to receive financial assistance from the government, stressing the advantages of early adoption:

“This is a project that the CBN has rolled out to reach every Nigerian in terms of financial inclusion and in terms of efficiency, reliability, and safety of banking transactions so that we can do banking transactions very easily and safely and the people in Nigeria can enjoy the benefit of the eNaira.”

The value of the naira has fallen by over 209% in the past six years, which has pushed Nigerians to adopt crypto in droves. An April report from the KuCoin crypto exchange highlighted that around 33.4 million Nigerians owned or traded cryptocurrencies in the last six months.

Restrictions on crypto trading in the country tightened after the launch of the eNaira in October 2021. The CBN banned banks from servicing crypto exchanges in February of the same year, but real enforcement happened in November 2021, when the CBN ordered the accounts of two crypto traders to be frozen.

This crackdown led commercial banks in the country to track their customer’s accounts, looking for signs of cryptocurrency trading which could cause accounts for fintech businesses to be flagged.

Emirates airline to accept Bitcoin payments, embrace NFTs and the Metaverse.

The United Arab Emirates (UAE) is making significant strides in its quest to digitize its economy and become a global crypto hub. The latest in this effort regards an announcement from Emirates, one of the world’s largest airlines.

According to local news outlets, the UAE flag carrier intends to add Bitcoin to its payments infrastructure. The firm’s Chief Operating Officer (COO), Adel Ahmed Al-Redha, also said Emirates has hired new staff. The personnel are skilled in matters of the metaverse and non-fungible tokens (NFTs) and will develop new applications to meet customer needs.

While at the Arabian Travel Market, the executive noted the different roles of the metaverse and NFTs:

With the metaverse, you will be able to transform your whole processes — whether it is in operation, training, sales on the website, or complete experience — into a metaverse type application, but more importantly making it interactive.

Al-Redha added that Emirates plans on best utilizing these tech aspects to attract an even wider customer base. Specifically, the company will employ blockchain for record-keeping, as it adds NFTs to its website for trading.

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