THE cryptocurrency Terra, or as it’s otherwise known, Luna, has faced a major collapse this week, with the value to the digital currency dropping my more than 99 per cent.

The value of Luna fell dramatically on Wednesday falling from $6.75 to just over $1 and as of Thursday afternoon it fell even further with the currency valued at just $0.02.

Investors who have accumulated Luna are asking whether the currency will ever recover after YouTube and music star KSI revealed he had lost millions due to its collapse.

Speaking to his 7.5 million followers, he tweeted: “What a week. I went to my hamsters funeral, performed in front of thousands of people at Wembley Arena with Anne Marie, my 3 million dollars worth of Luna is now worth a few $100. And it’s only Thursday.”

Here is what we know so far.

Why did Luna crash?

Luna saw a crash due to it’s like to terraUSD, a stablecoin linked to the US dollar.

Stablecoins are digital currencies pegged to traditional one and when the UST decouple from the dollar earlier this week, prices tumbled.

Over the past few days, Luna’s market value has dropped from $40billion to $400million which led to crypto exchange site Binance, temporarily suspending withdrawals of Luna on Wednesday.

Will Luna recover?

Of course the coin has potential to recover but it comes at a time of uncertainty in the market.

There is currently a general downturn for cryptocurrency with many coins losing a quarter of their value as investors appear to be moving towards safer investments amid the current financial market.

The founder of Terraform Labs, Do Kwon tweeted this week: “Close to announcing a recovery plan for $UST. Hang tight.”

He later added: “I understand the last 72 hours have been extremely tough on all of you – know that I am resolved to work with every one of you to weather this crisis, and we will build our way out of this.

“The Terra ecosystem is one of the most vibrant in the crypto industry, with hundreds of passionate teams building category defining applications within… Terra’s return to form will be a sight to behold.”

Is cryptocurrency safe?

Martin Lewis addressed cryptocurrency on The Martin Lewis Money Show last year where he specifically mentioned Bitcoin but the warning applies to any form of online cash.

He said: "Bitcoin is set up as a currency – a non-governmental currency – so you're meant to be able to spend it, but I'm presuming you're thinking of this not to spend but more as an investment, which is what most people are looking at.

"First of all, is it safe? Well, some people have lost money in their wallets. Like gold it can be stolen, and cryptocurrency is a bit like an equivalent to gold as it's a store of value of what people are putting in. You have to be very careful."

He added: "As to whether it's any good – I don't talk about investing. The thing about investing – and Bitcoin is an investment – is that prices go up and prices go down. With Bitcoin, they go up massively and they go down massively. And the reason for stressing that so much is that you can make a fortune, but you may lose a fortune.

"So, if you can't afford to lose the money that you put in, then do not invest in it. It's a gamble, like all forms of stocks and shares, and all forms of investment and putting money in gold. That's your choice, but if you do it the right way the investment should work for you, but it doesn't mean you won't lose money though."