China’s internet users are paying close attention to the crypto crash

While China has banned cryptocurrency trading, its people remain interested in the ups and downs of the crypto market, not least because many of them have found workarounds and continue to buy and sell all sorts of tokens.

Bitcoin’s price continued to crater on Monday after a rough weekend, down more than 50% from its peak of $69,000 in November 2021 and nearing the $30,000 mark. As my colleague Jacquelyn wrote, the crash is happening in tandem with the depegging of algorithmic stablecoin terraUSD (UST).

A stablecoin is a digital currency that is pegged to a more stable reserve asset like the US dollar or gold and is designed to reduce volatility while offering the benefits of a digital currency, like speedy transactions. An algorithmic stablecoin is one that relies on algorithms to maintain a price similar to a central bank rather than holding actual cash in a reserve to back it. UST is created by “burning” its sister token Luna using smart contracts, or lines of code written into a blockchain to automatically execute decisions.

Terraform Labs, the organization behind UST, cryptocurrency Luna and Luna Foundation Guard, emptied its treasury wallet of all of its bitcoin, about 42,530 bitcoin, or $1.3 billion, on Monday. The price of UST slid to about $0.95.

On the same day, the hashtag #luna shot up to the top ten keywords on Weibo, which is China’s equivalent of Twitter used by 570 million people monthly and is widely regarded as a bellwether for public discussion in the country. Posts hashtagged #luna had generated nearly 15 million views as of Monday evening.

“LFG [Luna Foundation Guard] announced lending $1.5 billion to rejuvenate UST, but from my perspective, Luna has seen its day. Even if it’s rescued, it might go on to suffer from Parkinson’s disease, trembling and left half alive. No one would dare get involved following such a trust crisis,” wrote one user with over 200,000 followers on Weibo. Others shared screenshots of their losses incurred by Luna’s crash, of which price has dropped more than 50% within 24 hours.

While it’s hard to measure how many people in China are trading crypto, nearly 10% of web traffic to OKX, which consistently sits atop the 15 exchanges worldwide, comes from China, according to web analytics company SimilarWeb (h/t Wu Blockchain).