(Reuters) - SEOUL, May 19 - South Korean speculators have poured into Luna, a cryptocurrency that lost 99.99 percent of its value last week after its linked stablecoin TerraUSD failed, figuring they have little to lose with prices so outrageously low.
Both coins are linked to Terra, a blockchain platform co-founded by Korean developer Do Kwon, and investors in them have lost about $42 billion, according to blockchain analytics firm Elliptic.
Luna was one of the most popular cryptocurrencies in the world, and its demise, along with that of TerraUSD, wreaked havoc across the cryptosphere, with bitcoin losing about a quarter of its value between May 9 and 12.
"Luna was previously a significant currency with a top-ten market capitalization, therefore they would do all it takes to resurrect it," one hopeful investor said in a blog on South Korea's online platform Naver, without revealing who "they" may be.
The writer claimed to have purchased 300,000 Luna on an international crypto market over the weekend for 0.33 won ($0.0003) each.
The writer claimed to have purchased 300,000 Luna on an international crypto market over the weekend for 0.33 won ($0.0003) each.
According to a source at the FSC who, as is common for South Korean officials, declined to be named, the number of investors in the failing cryptocurrency increased by more than 50% in little over two days to stand at 280,000 as of May 15.
The majority of the purchases were made by domestic speculators, while there were some foreign inflows, according to the source.
Bithumb and Upbit, two of South Korea's main exchanges, have announced that trading support for Luna would be suspended on May 27 and May 20, respectively, while Coinone has banned deposits in the cryptocurrency ahead of a likely de-listing on May 25.
The token's price hasn't changed much as a result of the purchases. It's been bouncing about between one-hundredth and four-hundredths of a cent over the previous week.
However, policymakers are concerned about South Koreans' proclivity to invest in volatile and hazardous assets such as stocks and cryptocurrencies, particularly among the younger generation.
Their prior excitement had propelled Luna and TerraUSD into the top 10 most valuable cryptocurrencies by market capitalization.
However, on May 10, TerraUSD's 1:1 peg to the dollar was ruptured, and everything fell apart. It was roughly 10 cents on Wednesday.
TerraUSD's value is determined by complicated computational procedures, related to its partnered token Luna, which is free floating, unlike most other major stablecoins that are backed by other assets.
Under the scheme, one TerraUSD token could be exchanged for $1 of Luna, and the currencies would be destroyed once exchanged.
If TerraUSD went below $1, traders were encouraged to acquire the stablecoin in order to exchange it for $1 worth of Luna, reducing TerraUSD supply and pushing the price back up to $1. That was the notion, but the market contradicted it.
Hundreds of furious retail investors took to social media to vent their frustrations, with some even asking Kwon to reimburse them for their losses.
Kwon revealed intentions to modify the system so that TerraUSD will be backed by reserves in the future last week, but it is unclear whether this proposal will be implemented.
Because bitcoin trading occurs outside of the government's regulatory domain, there is nothing the government can do to protect investors.