Avalanche (CRYPTO: AVAX) is down 50% month-to-date as uncertainty builds up around the fate of tokens lying in Terra’s (CRYPTO: LUNA) reserves.
What Happened: According to data from Benzinga Pro, AVAX dropped 18% from a high of $33.28 to a low of $27.72 on Thursday. The token is down 78% from its all-time high of $144 in November.
A large part of the slide happened after Terra’s stablecoin TerraUSD (CRYPTO: UST) and its surrounding ecosystem collapsed.
Investor fears worsened after Terra proposed a hard fork, currently being deliberated by the community, and project founder Do Kwon came under additional regulatory scrutiny.
See Also: IS TERRA (LUNA) DEAD?
When UST lost its peg, Terra sold the entirety of its $3.5 billion Bitcoin (CRYPTO: BTC) reserves to restabilize the peg. Although Terra acquired 1.97 million AVAX tokens for its reserves earlier this year, the blockchain hasn’t sold any just yet.
"Given the proposed Terra chain fork, LFG has disclosed no plans to use the AVAX," said Avalanche in a tweet on May 19.
“Should any sales be contemplated for the LFG reserves, the Avalanche Foundation is ready to work with LFG on a sensible trading strategy.”
2/ Terraform Labs (TFL) purchased 1.09M AVAX, with a one year lockup. This amount represents around 0.5% of the past week’s AVAX volume.
— Avalanche 🔺 (@avalancheavax) May 19, 2022
