Altcoin News

Terra (LUNA) Slumps 14% This Week, Here’s Why

Terra (LUNA) sank to an over one-month low this week as the release of 10 million tokens into circulating supply caused a price shock.
Published by
Terra (LUNA) Slumps 14% This Week, Here’s Why

Terra (LUNA), the native token on the eponymous blockchain, sank to an over one-month low this week as the release of 10 million tokens into circulating supply caused a price shock.

The token dropped 14% this week, and trading near a one-month low of $81.34. It is also one of the worst performing cryptocurrencies this week.

Advertisement

LUNA supply shock?

A bulk of the token’s losses stem from a donation of 10 million LUNA tokens to the Luna Foundation Guard (LFG). The donation was made by lead Terra developer Terraform Labs, and, is intended to be deployed towards bolstering the LFG’s stablecoin reserves.

LFG’s reserves, which back the stablecoin UST, are worth about $2.45 billion, of which nearly 70% is Bitcoin (BTC). The community recently applied the LUNA donation towards buying more BTC for the reserve.

But the 10 million tokens were also from Terraform’s non-circulating LUNA reserves. Their release into active, circulating supply had a deflationary effect on LUNA prices. The token’s price slid by over 6% in immediate reaction to the donation.

LFG’s reserves are an attempt to lend UST further credibility as a completely decentralized algorithmic stablecoin. The reserves are set to act as a buffer for any extreme liquidity shocks.

But Terra’s heavy concentration of BTC in its reserves has drawn criticism, and also spurred some LUNA selling. BTC tends to log large price swings, making it unsuitable to use as a reserve currency.

Tracking BTC, the value of Terra’s reserves recently hit a one-month low.

Advertisement

Terra has more locked tokens than in circulation

LUNA has been criticized over the fact that its non-circulating supply, held by Terraform Labs, is far more than the token’s circulating supply. The release of these tokens could further rattle LUNA prices.

Data from Terra Analytics shows that 383 million LUNA tokens are locked, compared to 358 million tokens in circulation.

Terraform, and the LFG have attempted to offset this supply difference by regularly burning LUNA to mint UST. The move is inflationary for the token’s prices, and also generates more of the stablecoin for circulation.

Prior to the donation, nearly 132 million tokens were burnt in LUNA’s lifetime. But the token is still prone to shocks if more LUNA is released from Terraform’s reserves.

Advertisement

Share
Ambar Warrick

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn't trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns. You can reach him at ambar@coingape.com

Published by
Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.

Recent Posts

  • 24/7 Cryptocurrency News

Roger Ver, ‘Bitcoin Jesus,’ Settles $48M Tax Fraud Case with U.S. DOJ

Roger Ver, widely known in the crypto world as “Bitcoin Jesus,” has reached a settlement…

October 10, 2025
  • 24/7 Cryptocurrency News

Senate Democrats’ New DeFi Proposal Stalls Crypto Market Structure Talks

Senate Democrats have proposed new regulations for decentralized finance (DeFi) that they want to include…

October 10, 2025
  • 24/7 Cryptocurrency News

Zcash (ZEC) Extends Rally Above $200 as Privacy Narrative Gains Reflexive Momentum

Zcash (ZEC) now trades above $200. The rally reflects a reflexive surge in investor belief,…

October 10, 2025
  • 24/7 Cryptocurrency News

Pump.fun Rival Zora Rallies Over 30% Following Robinhood Listing

Zora, Coinbase-based creator economy platform, has been listed on Robinhood. This also highlights its increased…

October 9, 2025
  • 24/7 Cryptocurrency News

Peter Brandt Lists XRP Among Shorts Amid Crypto Market Crash

Veteran trader Peter Brandt has doubled down on his bearish XRP prediction. This time, he…

October 9, 2025
  • 24/7 Cryptocurrency News

Fed’s John Williams Backs More Rate Cuts This Year Amid Labor Market Concerns

New York Fed President John Williams has shown his support for additional Fed rate cuts…

October 9, 2025