It is an understatement to say that the cryptocurrency market has been suffering since the last bull market ended. Since the end of 2021, almost every altcoin has seen a significant dip in prices and interest alike.
As bitcoin fell from its all-time high of around $67,500 to the current level of $20,000, the entire blockchain industry has frequently been exposed to various issues. Liquidity crunches, low trading volumes etc have been some of these. However, the biggest shock that customers had this year was the downfall of the then-top-grossing coin LUNA.
Currently known as LUNC or Luna Classic, the original token by Terra just saw a decent increase in price, making investors wonder about the future of the project
What is Terra Luna?
Launched in July 2019, Terra was created as an innovative blockchain product by the Korean company Terraform Labs. The project was at the time, a creative idea and was widely embraced by major investors. Due to this, a whopping $32 million was raised by the company to develop its flagship product.
LUNA is originally the native token of Terra which aims to create stable coins that were both decentralized and provided complete stability. With an integral role in the Terra ecosystem, LUNA was often referred to as a staking token or protocol token.
To make this possible, the project uses the dual token system, where the value of one token is tied to the value of the other. This other token that operates on Terra as a stablecoin is called TerraUSD or UST.
The dual token mechanism worked on the principle that if UST, which was pegged at $1, rose in price then in order to bring its value down, LUNA tokens were burned. This ensured that more UST tokens were minted, thereby decreasing its value.
On the other hand, if UST was trading at a price worth less than $1, then LUNA tokens would be bought using the stablecoin, thereby increasing demand by incentivizing lesser supply. At the time of creation, the project’s aim was considered an extremely innovative effort to create a truly decentralized stablecoin.
Thus, LUNA and UST both functioned on the blockchain depending on each other to function efficiently. Both tokens were widely embraced by the community and were popularized further by the company’s CEO Do Kwon, who is considered an influential person in the blockchain space.
Currently renamed as LUNC, Pantera, Coinbase Ventures, Galaxy Digital and Hashed are some of the top investors that have been actively involved in the project.
What caused the collapse?
The LUNA ecosystem was doing extremely well during the bull market and was positioned as one of the top cryptocurrencies in the space. In April 2022, the price of LUNA skyrocketed and was trading at around $116 making it the then 7th largest cryptocurrency by market cap. However, things took a very shocking turn for the investors right after, which contributed to the downfall of the entire project.
The bearish market had already put LUNA in a disadvantageous position, as it dropped to around $40 within a day. After that, it was followed by a direct downtrend, causing the token to fall as low as $0.000016. The stablecoin, which was supposed to be the top offering of the project also lost its $1 peg, causing a disbalance in the operation of the ecosystem.
This was considered a major black swan event since a fault in the Terra ecosystem was exploited by such a huge number of people in large quantities. Almost 99.99% of the total value was wiped out within a matter of days, where billions of investor money were lost.
The price of LUNA(now LUNC) at the time of writing is $0.00013, up several times from its price a week ago at around $0.00099. However, the community seems to be bearish on the token since the project has apparently lost all credibility and might stay at the same level. A lack of interest in the project and high criticism for its past may indicate that there is not much opportunity for growth in the project.
The industry has, however, been considering a very popular and newly launched P2E token TAMA of the Tamadoge project. With an innovative approach, the project has managed to sell over $8.2 million worth of tokens. The memecoin status combined with utility may contribute to the project being extremely successful in the future.
The token is currently listed on exchanges like Lbank and is expecting several others to add it in the upcoming weeks.
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