By Jihoon and Cynthia Lee

SEOUL (Reuters – South Korean speculators have been investing in Luna recently, a cryptocurrency which lost 99.99% last week when its paired stablecoin TerraUSD crashed.

These tokens are associated with the, a Blockchain platform founded by Do Kwon. Investors in these platforms have lost approximately $42 billion, according to Elliptic, a blockchain analytics firm.

Luna was one of the most loved cryptocurrencies in the world. Its downfall along with TerraUSD caused chaos across the crypto spectrum worldwide. Bitcoin lost around 25% between May 9-12.

Luna, which was valued at nearly $100 by late April, is currently trading at just one cent. Speculators are betting it will recover and some believe it’s too large to lose.

A hopeful investor posted the following in an article on South Korea’s Naver blog: “Luna used to be a large coin with high market capitalization, so they will make whatever it takes” without naming “they”.

Blogger said that he purchased 300,000 Luna during the weekend for 0.33 won ($0.0003) each using an international crypto-exchange.

South Korea’s Financial Services Commission issued a warning Tuesday to warn people against investing in Luna because of the sudden rebound in buying.

According to the FSC, the number of investors in South Korea’s failed cryptocurrency increased by more than half in two days. The total figure stood at 280,000 at South Korea’s main exchanges as of May 15. This was according to an anonymous source who declined to identify themselves as a South Korean bureaucrat.

According to the source, most of the buying was done by domestic speculators. But, some international inflows were also present.

Bithumb (South Korea’s biggest exchange) and Upbit (South Korea’s second largest exchange) said that trading support will be suspended for Luna on May 27th and May 20th, respectively. Coinone however, has stopped depositing in crypto-currency to prevent a de-listing possible on May 25th.

It has not had an impact on its price. It fluctuated in the range of one-hundredth to forty-hundredths a cent over the week.

Regulators are concerned about the tendency of South Koreans to place their money in risky and volatile assets, from stocks to cryptocurrency, especially the younger generation.

Luna and TerraUSD were able to rise from their earlier excitement, making them among the top ten most valuable cryptocurrencies in terms of market capital.

However, things went sour on May 10 when TerraUSD lost its 1:1 dollar peg. It traded around 10 cents on Wednesday.

TerraUSD is not like other major stablecoins that are supported by assets. Its value comes from complex algorithmic processes linked to Luna, its paired token, and is therefore free floating.

The system allows one TerraUSD token to be traded for $1 Luna. After the swap, the coins will be destroyed.

TerraUSD was lowered to below $1 by traders, who were then incentivised and paid $1 of Luna to exchange it. TerraUSD’s supply would decrease and its price rise to $1.

This was the theory. However, the market has proven the theory wrong.

The market collapsed and hundreds of angry retail investors took to social media to vent their frustrations, some asking Kwon to pay for their losses.

Kwon last week announced that he plans to make TerraUSD more secure by adding reserves. However, it remains unclear if the plan can be implemented.

The government cannot protect cryptocurrency traders because they are not within its regulatory scope.

($1 = 1,273.9300 won)