South Korean speculators in recent days have piled into Luna, a cryptocurrency that lost 99.99% of its value last week after its paired stablecoin TerraUSD collapsed, considering they have little to lose with prices so ridiculously low.

Both tokens are associated with Terra, a blockchain platform co-founded by Korean developer Do Kwon. According to blockchain analytics firm Elliptic, investors in them have lost around $42 billion.

The worth of Luna was nearly $100 in late April, but now it is now trading at a fraction of one cent. So low that there has been a rush of buying from speculators who believed that it will stage a miraculous recovery.

The South Korea’s Financial Services Commission warned people on Tuesday against investing in Luna, as the sudden resurgence of buying caught its attention.

Investors grew more than 50% in just over two days at South Korea’s major exchanges to stand at 280,000 as of May 15, according to a source at the FSC who, as is customary for South Korean bureaucrats, declined to be named.

Most of the buyers came from domestic speculators, though there were international buyers as well, the source said.

The buying has little effect on the token’s price. Over the past one week, it has been fluctuating between one-hundredth and four-hundredths of a cent.

Regulators are concerned of South Koreans, particularly the younger ones, to invest in volatile and risky assets from stocks to cryptocurrencies.

On Wednesday it traded at around 10 cents.

Luna and TerraUSD were placed among the world’s ten largest cryptocurrencies ranked by market cap with their earlier enthusiasm. However, things began to fall apart on May 10, when TerraUSD’s 1:1 peg to the dollar was shattered.

TerraUSD’s differs from other major stable coins which are supported by other assets. Its value is derived by complex algorithmic processes, linked to its paired token Luna, which is free floating. Under the system, one TerraUSD token would be exchanged for $1 of Luna, and vice versa, and once swapped the coins would be destroyed.

If TerraUSD dropped below $1, traders were incentivised to buy the stablecoin to switch it for $1 worth of Luna, and so reduce the supply of TerraUSD’s and push its price back to $1. 

Theoretically that should be the way but the market proved the premise wrong.

Last week, Kwon announced plans to change the system so TerraUSD will supported by reserves in future, but it is unsure whether this plan is feasible. 

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