luna: New Luna, Old Story: Terra’s new token wipes out 70% wealth in less than 48 hours

Synopsis

The older tokens have been renamed Luna Classic (LUNC), with a market cap of less than a billion dollars, which was more than $40 billion a couple of months ago.

According to the market participants, it is unclear how the new Luna will be collateralized, and there is a lack of transparency around reserve assets needed to support the coin. Things are not likely to change anytime soon, they say.New Delhi: The revival plans of Terra were bruised badly as the newly issued Luna token promptly plunged. The Luna 2.0 tokens issued over the weekend saw a knee-jerk reaction.

According to Coinmarketcap data, the tokens were issued at $17.8 and eventually zoomed to $19.53 on May 28. However, in less than 48 hours, it nosedived over 70 per cent to Rs $5.45 on Monday.

A key element of Terra’s revival plan was to deliver new Luna tokens to holders of the project’s now vastly depreciated UST stablecoins as well as to holders of the older, existing Luna tokens.
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The older tokens have been renamed Luna Classic (LUNC), with a market cap of less than a billion dollars, which was more than $40 billion a couple of months ago.

According to the market participants, it is unclear how the new Luna will be collateralized, and there is a lack of transparency around reserve assets needed to support the coin. Things are not likely to change anytime soon, they say.

Sharat Chandra, VP- Research & Strategy, EarthID, said, “Hard forking the chain without addressing the underlying algorithm that failed to keep the peg was wishful thinking for the founder and community members who voted for Terra2.0.”

Investors had lost faith in the Terra ecosystem, and a mere change of chain nomenclature without fixing the root cause of the debacle isn’t going to help the cause of the revival of Terra, he added.

The total market capitalization of Luna.20 is estimated to be around $1.28 billions, based on the current price and total circulation of 210,000,000 Luna 2.0 tokens as of now. Its supply is capped at 1,000,000,000, according to the data.

However, investors are also not very interested in the token after the Terra Classis Debacle. The volumes of Luna 2.0 tanked about 66 per cent as a token worth $130.09 million exchanged hands in the last 24 hours.

Vikram Subburaj, CEO, Giottus Crypto Platform, said that the new Luna 2.0 token is in the process of being airdropped to old LUNA and UST holders.
“While some exchanges have opened trade, LUNA’s current trade liquidity is limited by the airdrop schedule as well as its vesting schedule,” he added. “High volatility in trade prices, therefore, are expected in the first month or so.”

Market participants are advising investors to wait for market equilibrium and stability before entering a long term trade. Short term punting should be avoided, they said.

Based on the current market cap, Luna 2.0 ranks is not even in the top 2,800 cryptocurrencies, making it supremely risky, Subburaj said. “Investors should stick to the top 100 names of crypto assets with higher weights to the bluechips.”

Luna stares at an uncertain future and investors’ disillusionment can lead to the irrelevance of algorithmic stablecoins. It’s expected to meet the fate of earlier failed algo stablecoins like Basis cash and Iron.

Terra’s original native coin, Luna Classic (LUNC) led to a massive wealth erosion from the crypto markets as its algorithmic stablecoin USD Terra (UST) was depegged from its value of $1. LUNC is asking for some fractional cents currently from $118 at its prime.

Darshan Bathija, CEO and Co-Founder of Vauld, the crypto community, is still visibly sceptical about the project’s reliability and viability, resulting in investors immediately cashing out.

“When it comes to investing, what needs to be taken into account is the project’s reliability, tokenomics and key characteristics,” he added. “Trust is at the core of any financial system but one should do his homework well before investing.”

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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Updated: 05/30/2022 — 10:00