Terra is on a revival path after the collapse of its original native token and algorithmic stablecoin TerraUSD (UST).
In late May 2022, Terra’s community voted in favour of founder Do Kwon’s proposal to create a new blockchain, commonly referred to as Terra 2.0. The old blockchain was renamed Terra Classic and its token was rebranded as Luna Classic (LUNC).
The new Terra 2.0’s native token LUNA or LUNA2 (as listed on various exchanges) was airdropped to holders of old Terra tokens in the days that followed.
Most importantly, the Terra 2.0 chain chose to abandon its flagship yield-generating stablecoin UST in bid to rebuild again with a clean slate.
As of 13 July 2022, both the old and new Terra chains continue to coexist in parallel following the hard fork.
In this article, we will discuss the road ahead for the Terra 2.0 blockchain and its new LUNA token. You will also come across information on Terra’s history, founders and Terra price predictions for 2022 and beyond from analysts
Origins: The rise and fall of Terra
Before the collapse of Terra’s algorithmic stablecoin UST and its native token in May 2022, the blockchain was a thriving network which focused on decentralised finance (DeFi) offerings.
Yield-seeking investors from far and wide flocked to Terra’s passive income protocol Anchor (ANC) for its 20% interest rate on UST deposits, which in turn drove demand for UST and the old LUNA token.
At its peak in April 2022, Terra’s native token boasted a market capitalisation of over $41bn, and was among the top 10 largest cryptocurrencies in the world.
Historical data from analytics website DefiLlama showed that Terra was also among the top three blockchain networks in terms of total value locked (TVL), with over $21bn in TVL at its peak.
Terra’s fortune took a drastic turn in early May 2022 when its ecosystem saw capital flight, following the depegging of algorithmic stablecoin UST and a plunge in LUNC prices.
Investors who were once drawn to near 20% returns on UST deposits began to withdraw and sell their UST tokens in a frenzied exit, as UST began losing its dollar peg on 9 May 2022. As more UST holders sold their tokens, LUNC – which was designed to be a balancing token to help maintain UST’s dollar peg – saw hyperinflation.
Between 9 May and 12 May, LUNC lost nearly all of its value as it dropped by 99.98% from about $64 to $0.0087. UST, which was designed to hold the value of a US dollar, plunged to 25 US cents in the same period.
Cascading effects from the Terra crisis engulfed a cryptocurrency market that was already weakened by difficult macroeconomic conditions.
Three Arrows Capital (3AC), a billion dollar crypto hedge fund that had exposure to Terra’s ecosystem, went bankrupt as falling crypto prices forced liquidations of collateralised loans and leveraged trading positions across the industry, aggravating the sell-off. Investor sentiment plummeted as crypto lending platforms like Celsius (CEL) and Babel suspended withdrawals for clients.
Analysts at Saxo Bank noted that Terra’s collapse and its ripple effects on the crypto market could result in stricter market regulation.
“Regulators and policymakers are still working on national and international regulations for the cryptocurrency space, and fear is now that the regulatory framework will be even more strict, and it could limit some of the existing use-cases for cryptocurrencies. In case potential applications for cryptocurrencies are constrained, the sentiment will likely go down as well.”
As of 13 July 2022, stablecoin UST is trading at around $0.04 while its sister token LUNC is trading at around $0.00009, according to data from CoinMarketCap.
Founder profile: Do Kwon
Terra was founded in 2018 by Daniel Shin and Do Kwon, with the aim of driving blockchain and cryptocurrency adoption by focusing on usability and price stability.
Kwon is the CEO of Terraform Labs, the entity behind Terra. Kwon was previously the CEO and founder of decentralised wireless mesh networking start-up Anyfi. He also worked as a software engineer at Apple (AAPL) and Microsoft (MSFT).
According to his LinkedIn profile, Kwon studied computer science at Stanford University in California from 2010 to 2015.
Kwon is the face of Terra. He is known to have an outspoken personality and has used Twitter to voice his bullish opinions about the Terra ecosystem on numerous occasions.
Meanwhile, Shin previously co-founded and led the South Korean e-commerce platform Ticket Monster, as well as start-up incubator Fast Track Asia.
After the collapse of Terra, many investors have filed lawsuits against Kwon and other Terra entities for misleading investors. On 12 June, Kwon denied claims that he allegedly cashed out $2.7bn in the months leading up to the collapse of Terra.
1/ This should be obvious, but the claim that I cashed out $2.7B from anything is categorically false
— Do Kwon ???? (@stablekwon) June 12, 2022
Looking forward: What is Terra 2.0?
The Terra Ecosystem Revival Plan was passed by the Terra community on 25 May 2022, and approved the creation of a new blockchain and a new native token.
According to Terra’s website, the new Terra 2.0 network launched on 27 May 2022. The new LUNA token was distributed to LUNC stakers, LUNC and UST holders and essential app developers of the old Terra chain.
According to Terra, new LUNA tokens were not distributed to Terraform Labs (TFL) and Luna Foundation Guard (LFG), two leading entities behind the old Terra chain.
“Lastly, while TFL intends to continue supporting and building on the Terra 2.0 network, it is not by any means a ‘TFL-led’ chain – we consciously bowed out of airdrop allocations and all the decisions are being made by various community groups, albeit in a rocky fashion,” tweeted Do Kwon on 9 June.
1/ While most of our efforts had been spent on Terra 2.0 and making sure ecosystem developers can find a home after the depeg incident, we will soon be more proactive in communicating with the press & getting the right information out there.
— Do Kwon ???? (@stablekwon) June 9, 2022
According to Terra, 30% of a user’s LUNA token allocation can be freely traded at genesis but 70% of the allocation will be locked for six months. After six months, small portions of the 70% will be released with every block added to the Terra 2.0 chain for two years.
“After two years, all the airdropped Luna will have been released, and the vesting will be complete,” said Terra.
According to Terra, the initial supply of LUNA at the genesis of the new chain will be one billion coins. New coins will be released with every block as staking rewards at a default rate of about 7% per annum. Users on the new chain will be able to vote on improvement proposals after depositing a minimum of 50 LUNA tokens.
Like the old chain, Terra 2.0 will continue to be a proof-of-stake blockchain built on the Cosmos (ATOM) network and secured by Cosmos-native Tendermint consensus.
According to Terra-based analytics firm Coinhall, about 88 projects have expressed interest in supporting the Terra 2.0 ecosystem. The list includes decentralised exchange Astroport, blockchain infrastructure provider Illiquidity, non-fungible token (NFT) protocol Galactic Punks and payment platform Outlet Finance among others. The majority of the projects on the list previously existed on the old Terra chain.
Terra 2.0 remains a shadow of its former self. Before its collapse, Terra was among the top three blockchain networks in terms of TVL, alongside the likes of Ethereum (ETH) and Binance Smart Chain (BNB).
On 13 July 2022, CoinGecko said in its Q2 2022 Cryptocurrency Report :
“The collapse of UST and LUNA in May saw Terra’s TVL shrink to just 5%. By the end of June, there was just over $21m left on the network. The new Terra 2.0 network has even less than that, at $13m TVL.”
Price action: New LUNA tokens
New LUNA tokens or LUNA2 tokens (as referred by many crypto exchanges) were airdropped to eligible wallet addresses on 28 May 2022.
According to the LUNA2/USD chart from crypto exchange BitFinex, the new LUNA token opened at a price of $2.1 on 28 May. On 30 May, the token jumped to a post-hard fork high of $12.24. Since then, the LUNA token has lost over 80% to trade at $1.87 as of 13 July 2022.
According to CoinMarketCap, as of 13 July 2022 LUNA is the 223rd largest cryptocurrency, with a market capitalisation of $239m. The current circulating supply of the new LUNA token stands at over 127.4 million.
LUNA price prediction for 2022 and beyond
Note that the LUNA price predictions below are those for the new Terra 2.0 chain’s native token. LUNA2 price predictions are the same as the LUNA price predictions given below.
As of 13 July 2022, CoinCodex’s short-term LUNA coin price prediction indicated that the token’s value could fall over 19% to reach $ 1.1 by 18 July 2022. CoinCodex’s one-month LUNA price prediction saw the token slumping further to $0.44.
For the longer term, algorithm-based website WalletInvestor’s LUNA crypto price prediction expected the token to trade at an average price of over $52 by the end of 2022. WalletInvestor’s LUNA price prediction for 2025 expected the token to rise to an average price of about $159 by the end of 2025.
DigitalCoinPrice was also bullish about LUNA’s price performance over the long term. According to its LUNA price prediction for 2030, DigitalCoinPrice expected the token to trade at an average price of $7.81 that year.
Meanwhile, Gov.capital’s Terra price prediction as of 13 July 2022 saw the LUNA token trading at about $88 in one year’s time.
Finally, Long Forecast’s Terra price prediction for 2022 held a bearish view on the future of LUNA. It saw the token closing the year at $1.07. Long Forecast’s Terra price prediction for 2025 saw the LUNA token fall below the dollar mark to $0.96 by the end of 2025.
Note that analyst and algorithm-based LUNA future price predictions can be wrong, and that forecasts shouldn’t be used as a substitute for your own research.
Always conduct your own due diligence, and remember that your decision to trade or invest should depend on your risk tolerance, expertise in the market, portfolio size and investment goals.
FAQs
Is LUNA a good investment?
It might be, though it’s a little early to say. The new LUNA token, the native token of the Terra 2.0 chain, was only launched after the collapse of the original Terra blockchain in May 2022.
Always conduct your own due diligence, and remember that your decision to trade or invest should depend on your risk tolerance, expertise in the market, portfolio size and investment goals.
Will LUNA go up?
It might. Various algorithm-based forecasting services have suggested that the new LUNA token could exhibit growth in the coming months and years.
However, price predictions and market sentiment can be wrong. Always conduct your own due diligence.
Should I invest in LUNA?
That’s for you to decide, but remember that cryptocurrencies are highly speculative assets. The original LUNA token, now referred to as LUNC, lost nearly all of its value within the span of a few days between 9 May and 12 May 2022, falling by 99.98% from about $64 to just $0.0087.
Always conduct your own due diligence, and remember that your decision to trade or invest should depend on your risk tolerance, expertise in the market, portfolio size and investment goals.
Further reading
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