When Satoshi Nakamoto developed Bitcoin in 2009, it inspired the birth of other cryptocurrencies in the market that crypto enthusiasts use for transactions in the crypto market nowadays. Among all the altcoins that emerged, one crypto has been making a name in the market and has caught the interest of crypto enthusiasts for its great features, but mostly because of its biggest crash: Terra Luna. You have probably heard or seen news blogs or articles about this crypto’s crashes over the years, which greatly impacted its investors. But is the crash of Luna a precedent in the history of crypto? Read on to know the cryptocurrency facts.
Cryptocurrency: Terra Luna
Terra Luna was developed in 2018 by a businessman and entrepreneur from South Korea, Do Kwon, at their headquarters in Singapore called Terra Labs. The founding company offers a vast list of stable coin alternatives, and one of them is Terra’s native token – Luna. Terra Luna dominated the news and articles in the crypto world for making it on the list of top 10 cryptocurrencies in 2021, where its price and market capitalisation reached all-time highs of $29.3 billion and $75.56 billion.
Terra’s blockchain network acts as a decentralised digital exchange and offers DeFi capabilities to its users. Customers are unrestricted to pay, hold or stake on the platform for an improved trading environment. Terra’s native token’s surge in popularity led to it being included in the listings of exchanges such as Binance, brokers like e-Toro, and broker-linking platforms such as Bitcoin Loophole among others. However, Terra’s status and appeal have come under scrutiny since the crash.
Due to the market’s volatile nature, it’s normal for most cryptocurrencies to experience a decline. However, the huge crash of Terra Luna reminded people of the global financial crisis of 2008, where about $830 billion of the overall market value of crypto assets were wiped out. The crash of cryptocurrency Luna and other cryptos in the market seemed pretty normal as it constantly happens. But why? Is the history of crypto known to suffer from these crashes?
History of Cryptocurrency
The prominent tale of the mysterious identity of Bitcoin’s creator Satoshi Nakamoto is not new to people in the cryptocurrency industry. Since Bitcoin was created in 2009, an increasing set of Bitcoin advocates started exchanging and mining the cryptocurrency, which makes it the first publicly used crypto to connect decentralised management, user privacy or blockchain-based scarcity.
According to CoinMarketCap, the estimated worth of more than 1,400 cryptocurrencies in circulation has dropped from over $800 billion at the beginning of January to about $460 billion by mid-January in 2018. Before deciding whether you want to invest in crypto or not, it’s crucial to know that you’re up for a bumpy ride. The cryptocurrency market’s volatile nature has caused the downfall of some cryptocurrencies, such as the Terra Luna.
To further understand everything about cryptocurrency and the crash of cryptocurrencies such as Terra Luna, we’ve compiled cryptocurrency facts that you should know.
1. Cryptocurrencies are volatile
Whether you are a newbie or not, the first thing you’ll probably notice is that they’re exceptionally volatile. This is because virtual currency trading occurs on various crypto platforms rather than a central exchange, which leads to increased volatility. Since the year started, the aggregate market cap of all cryptos combined has increased by more than 3,200%. Over the past six months, the world’s most popular cryptocurrency has undergone four corrections of at least 20%.
2. Cryptocurrencies are decentralised
Compared to the traditional currencies like the U.S dollars, digital currencies are not backed by a central bank or a government. This currency has no tangible fundamental factors either that help derive an appropriate valuation. While the earnings history of a publicly-traded stock or the economic performance of a country in connection with its GDP growth can be seen, digital currencies have no direct fundamental ties.
3. There are over 18,000 different cryptocurrencies
Since it has become popular and trending, it’s not surprising that everyone wants to get in on cryptocurrencies – this is why new cryptos are popping into the market daily. As of now, there are over 18,000 cryptos in the world. Some of the crypto platforms are start-ups, and unfortunately, not all cryptos are successful. With the long list of cryptocurrencies, it’s natural that some experience crypto crashes.
4. Cryptocurrency can’t be physically banned
While more and more countries have started accepting cryptocurrency as a mode of payment, some countries are also eager to ban cryptocurrencies. However, even though they have this strong urge to ban cryptos, it’s physically impossible. This is because anyone from anywhere can get a crypto wallet, and while these countries can make rules about disallowing purchasing of cryptos, the crypto market itself cannot be banned.
5. Miners play a crucial part
Cryptocurrency transactions must be affirmed, and the blockchain is regularly broadened to account for new trades and expenses. Crypto-mining involves utilising high-powered computers to unravel complicated mathematical equations to confirm and log trades on a competitive ground. The first to do so permits the miner to a reward through cryptocurrency tokens or transaction costs.
For many, cryptocurrency is an exciting concept that has the potential to transform and improve global banking. While Bitcoin is constructed on strong, democratic ideals, it is still a technical and experimental work in progress. There are various reasons why cryptocurrencies suffer from crashes, so keep in mind that the market is volatile. It’s recommended to research the crypto world – starting from the crypto facts above – to help you jumpstart your career on the right track.