AVALANCHE DROPS 30% ON FEARS TERRAS LFG WILL DUMP AVAX NEXT

The cryptocurrency market is known for its volatility, but the recent turmoil surrounding TerraUSD (UST) has sent shockwaves throughout the entire ecosystem.One of the most affected cryptocurrencies is Avalanche (AVAX), which experienced a dramatic price drop of 30% on May 11th, plummeting to $32.50, its lowest level since September 2025. Avalanche (AVAX) est pagando o pre o por ser um dos ativos colaterais que mant m a paridade da moeda est vel nativa da Terra, TerraUSD (UST), com o d lar americano.This sharp decline is directly linked to fears that the Luna Foundation Guard (LFG), tasked with maintaining UST's peg to the US dollar, will liquidate its AVAX holdings to defend the failing stablecoin. Skip to main content Bitcoin Insider. MenuThe situation highlights the interconnectedness of the crypto market and the risks associated with collateralized stablecoins.

But what exactly happened?Why is Avalanche so vulnerable to UST's struggles?And what does this mean for the future of AVAX and the broader crypto landscape? Avalanche (AVAX) paie le prix pour tre l'un des actifs collat raux qui maintiennent l'arrimage du stablecoin natif de TerraUSD (UST) avec le dollar am ricain.This article will delve deep into the situation, examining the factors contributing to AVAX's price drop, analyzing the LFG's potential impact, and offering insights into what investors should consider moving forward.From the perspective of both seasoned crypto veterans and newcomers, understanding the nuances of this situation is crucial for navigating the turbulent waters of the digital asset market.

Understanding the TerraUSD (UST) Crisis and Its Ripple Effect

The core of the problem lies with TerraUSD (UST), an algorithmic stablecoin designed to maintain a 1:1 peg with the US dollar. All the while, Avalanche (AVAX) is suffering the price for being one of the collateral assets used to keep TerraUSD (UST) pegged to the US currency. On May 11th, AVAX s stock plunged over 30% to $32.50, its lowest level since September 2025.Unlike stablecoins backed by traditional assets like cash or bonds, UST relies on a complex mechanism involving its sister token, LUNA, to maintain its stability.This mechanism, while innovative, proved to be its Achilles' heel.

When UST began to de-peg from the dollar, meaning its price dipped below $1, a ""bank run"" ensued.Investors, fearing further losses, rushed to redeem their UST for LUNA, putting immense pressure on the system.To stabilize UST, the LFG began selling its reserves, which included significant holdings of Bitcoin (BTC) and, crucially, Avalanche (AVAX).

The Role of the Luna Foundation Guard (LFG)

The Luna Foundation Guard (LFG) was established to safeguard the UST peg and promote the Terra ecosystem.Its primary function was to maintain a reserve of assets that could be used to defend UST in times of crisis. Related: Avalanche drops 30% on fears Terra's LFG will dump AVAX next As the largest stablecoin, Tether (USDT), saw its United States dollar peg slip, two camps emerged, one accusing Tether of malpractice and another confident that the peg would soon be restored unlike that of imploded U.S. dollar stablecoin TerraUSD (UST).These reserves included a mix of cryptocurrencies, with AVAX being a significant component.

The LFG's decision to use its AVAX holdings to defend UST stemmed from Avalanche's position as one of the collateral assets supporting the stablecoin.As UST's peg wavered, the LFG's strategy involved selling off these collateral assets to buy back UST, thus attempting to restore its value to $1. Avalanche drops 30% on fears Terra s LFG will dump AVAX next Luna Foundation Guard is emptying its crypto reserves to bring its stablecoin back to its $1-peg, risking a massive AVAX selloff.The inherent risk was that a large-scale sell-off of AVAX could trigger a significant price drop, exactly what transpired.

AVAX's Plunge: A Chain Reaction

The market's fear of a massive AVAX dump by the LFG triggered a wave of selling pressure, sending AVAX's price spiraling downwards. 主要な avax ダンプが先に？ avaxの価格 5 月 11 日に約 30% 下落し、2025 年 9 月以来の最低水準である 32.50 ドルに達しました。ustは23セントまで下落 、トレーダーと投資家の間でのステーブルコインの地位を効果的に低下させました。The fear, uncertainty, and doubt (FUD) surrounding UST's collapse amplified the negative sentiment, further accelerating the sell-off.

Here's a breakdown of the key factors contributing to AVAX's 30% price drop:

• LFG's Potential Sell-Off: The primary driver was the fear that the LFG would aggressively sell its AVAX holdings to defend UST, flooding the market with supply and driving down the price.
• UST De-Pegging: The instability of UST eroded confidence in the broader crypto market, leading to a general risk-off sentiment.
• Market Panic: The rapid decline in AVAX's price triggered panic selling among investors, further exacerbating the downward pressure.
• Algorithmic Stablecoin Concerns: The UST crisis highlighted the inherent risks associated with algorithmic stablecoins, raising questions about their long-term viability.

The timing of the drop also played a significant role.AVAX's massive intraday decline coincided directly with UST plummeting to lows around $0.23, highlighting the direct correlation between the two events.This painted a grim picture for traders and investors, effectively shattering UST’s image as a reliable stablecoin.

Analyzing the Impact: Short-Term Pain, Long-Term Potential?

The immediate impact of AVAX's price drop was undoubtedly painful for investors holding the cryptocurrency.However, it's crucial to consider the long-term implications and potential for recovery.

Here are some key considerations:

• AVAX's Fundamentals: Despite the current challenges, AVAX possesses strong underlying fundamentals, including a fast and scalable blockchain platform, a vibrant developer community, and a growing ecosystem of decentralized applications (dApps).
• Potential for Recovery: Once the UST situation stabilizes, and the LFG's impact subsides, AVAX has the potential to rebound, driven by its strong fundamentals and adoption.
• Market Sentiment: The overall market sentiment towards cryptocurrencies will play a significant role in AVAX's recovery. بهمن (AVAX) بهای یکی از دارایی های وثیقه ای را می پردازد که پیوند بومی TerraUSD (UST) Terra با دلار آمریکا را حفظ می کند.A broader market recovery could provide a tailwind for AVAX.
• Learning from the Crisis: The UST crisis has served as a valuable lesson for the crypto industry, highlighting the importance of robust risk management and the need for more transparent and resilient stablecoin designs.

Addressing the Concerns of a ""Major AVAX Dump""

The prospect of a ""major AVAX dump"" by the LFG has undoubtedly fueled market anxieties.While the LFG's actions have undeniably impacted AVAX's price, it's important to consider the potential limitations on their ability to further depress the market.

Firstly, the LFG's reserves are finite.As they continue to sell assets to defend UST, their holdings of AVAX and other cryptocurrencies will dwindle.Secondly, a complete liquidation of their AVAX holdings could further destabilize the market and potentially harm the entire Terra ecosystem, which the LFG is ostensibly trying to protect.It may be in their best interest to pursue a slower more controlled strategy rather than panic sell.

Navigating the Volatility: Strategies for Investors

The recent events have underscored the importance of prudent risk management in the cryptocurrency market. Avalanche (AVAX) is paying the price for being one of the collateral assets that maintain Terra's native stablecoin TerraUSD's (UST) peg with the U.S. dollar.Here are some strategies that investors can consider when navigating the volatility surrounding AVAX and other cryptocurrencies:

• Diversification: Don't put all your eggs in one basket.Diversify your crypto portfolio across multiple assets to mitigate risk.
• Dollar-Cost Averaging (DCA): Invest a fixed amount of money at regular intervals, regardless of the price. Major AVAX dump ahead? AVAX's price dropped about 30% to reach $32.50 on May 11, its lowest level since September 2025. Its massive intraday decline coincided with UST dropping to as low as $0.23, which effectively dented its stablecoin status among traders and investors alike.This can help to smooth out the volatility and potentially lower your average cost basis.
• Stop-Loss Orders: Set stop-loss orders to automatically sell your holdings if the price falls below a certain level.This can help to limit your losses in a market downturn.
• Due Diligence: Thoroughly research any cryptocurrency before investing. AVAX's price dropped about 30% to reach $32.50 on May 11, its lowest level since September 2025. Its massive intraday decline coincided with UST dropping toUnderstand its underlying technology, use case, and risk factors.
• Stay Informed: Keep up-to-date with the latest news and developments in the crypto market.Monitor market sentiment and be prepared to adjust your strategy accordingly.

It's essential to remember that past performance is not indicative of future results. Avalanche founder claims only one algorithmic stablecoin can succeed defends Terra s UST The founder of Ava Labs, Emin G n SirerThe cryptocurrency market is inherently unpredictable, and investors should be prepared for the possibility of losses. Related: Avalanche drops 30% on fears Terra's LFG will dump AVAX next. As largest stablecoin Tether saw its U.S. dollar peg slip, two camps emerged, one accusing Tether of malpractice and another confident that the peg would soon be restored unlike that of imploded U.S. dollar stablecoin, TerraUSD (UST).Consult with a qualified financial advisor before making any investment decisions.

The Founder's Perspective: Emin Gün Sirer's Defense

In the midst of the turmoil, the founder of Ava Labs, Emin Gün Sirer, offered his perspective on the situation. Avalanche is paying the price for being one of the collateral assets that maintain Terra's native stablecoin TerraUSD's (UST) peg with the U.S. dollar. Major AVAX dump ahead? AVAX's price droppedWhile acknowledging the challenges facing UST, he defended the concept of algorithmic stablecoins, claiming that only one can ultimately succeed.He also hinted at potential future developments and strategies for bolstering the Avalanche ecosystem.

This perspective, although optimistic, serves as a reminder that innovation often involves navigating periods of uncertainty and volatility.The long-term success of algorithmic stablecoins, and projects like Avalanche that interact with them, will depend on their ability to adapt, evolve, and address the risks highlighted by the UST crisis.

The Broader Market Context: Tether's (USDT) Resilience

While the UST crisis triggered widespread concerns about stablecoins, it also highlighted the relative resilience of other stablecoins, particularly Tether (USDT).Although USDT briefly experienced a slight de-pegging from the dollar, it quickly recovered, demonstrating the robustness of its backing and the confidence of the market in its stability.

This contrasting performance led to a divergence of opinions within the crypto community.Some accused Tether of malpractice, while others remained confident in its ability to maintain its peg.Regardless of the debate, the UST crisis served as a stark reminder that not all stablecoins are created equal, and investors should carefully evaluate the risks associated with each one.

The Future of Avalanche: Will It Recover?

The question on many investors' minds is whether Avalanche will recover from this setback. Avalanche drops 30% on fears Terra's LFG will dump AVAX next . news and more. Buy, Sell and Swap bitcoin, ethereum and 350 cryptocurrencies on BitSwapNow. No sign up required.While the short-term outlook remains uncertain, several factors suggest that AVAX has the potential for a strong comeback.

Consider these points:

1. Technological Advantages: Avalanche boasts a high-performance blockchain platform with fast transaction speeds and low fees, making it attractive for dApp developers and users.
2. Growing Ecosystem: The Avalanche ecosystem continues to expand, with a growing number of dApps and projects building on the platform.
3. Community Support: The Avalanche community is active and supportive, which can help to foster innovation and adoption.
4. Strategic Partnerships: Ava Labs has forged strategic partnerships with various organizations, which can help to drive adoption and expand the reach of the Avalanche network.

However, recovery is not guaranteed.AVAX's future success will depend on several factors, including the resolution of the UST crisis, the overall market sentiment towards cryptocurrencies, and the continued development and adoption of the Avalanche ecosystem.A critical task now for Avalanche is to distance itself from the negative perception of algorithmic stablecoins.

Conclusion: Lessons Learned and Moving Forward

The recent events surrounding Avalanche and TerraUSD have been a harsh reminder of the inherent risks and volatility within the cryptocurrency market. Luna Foundation Guard is emptying its crypto reserves to bring its stablecoin back to its $1-peg, risking a massive AVAX selloff.The 30% drop in AVAX's price, fueled by fears of an LFG dump, serves as a cautionary tale about the interconnectedness of the crypto ecosystem and the potential for cascading effects.

Despite the short-term pain, this crisis presents valuable lessons for investors, developers, and the broader crypto community.It highlights the importance of:

• Robust Risk Management: Diversification, stop-loss orders, and thorough due diligence are crucial for mitigating risk.
• Transparency and Resilience: Stablecoins need to be more transparent and resilient to withstand market shocks.
• Informed Decision-Making: Investors should stay informed about market developments and understand the risks associated with each cryptocurrency.

While the future of AVAX remains uncertain, its strong fundamentals, growing ecosystem, and supportive community provide a foundation for potential recovery.By learning from the lessons of this crisis and adopting prudent risk management strategies, investors can navigate the volatility of the crypto market and position themselves for long-term success.Remember to perform your own research before making any investment decisions. Avalanche is paying the price for being one of the collateral assets that maintain Terra s native stablecoin TerraUSD s (UST) peg with the U.S. dollar. Major AVAX dump ahead? AVAX s price dropped about 30% to reach $32.50 on May 11, its lowest level since September 2025.This is not financial advice.