Trouble at coin mill
What’s the latest?
The crypto fortunes of Terra tokens Luna and Luna Classic plummeted as a South Korean court issued an arrest warrant against Do Kwon, the network’s founder, and five others, this week.
Luna fell 36%, while LUNC dropped 25%, with much of the price movement coming after news of the warrant was made public. The warrant was issued four months after the collapse of the US$40 billion Terra ecosystem and its algorithmic stablecoin (UST), which was the first domino to fall in this year’s crypto winter.
TerraUSD, labelled a stablecoin, which was once among the top cryptocurrencies by market value, broke its 1:1 peg to the US dollar in May, plunging in value and sending paired token Luna dropping with it.
According to blockchain analytics firm Elliptic, investors in the two coins lost an estimated $42 billion. The market turmoil that ensued led to the failure of several major crypto companies including US crypto lender Celsius and Singapore-based crypto fund manager Three Arrows Capital.
Not so fortunate fortunes
The latest twist is all the more remarkable as there was a frenzy of buying in Terra Luna recently, which now seems to have worn out. Investors booked profits pushing Luna to stumble to 74th rank in the top 100 cryptocurrency list. Last week, Luna made a more than 361% monthly rise due to approval for a 1.2% tax burn proposal of Terra Classic. However, currently, the token is under pressure.
Ultimately, experts say Luna Classic has little axiomatic reason to be valued as highly as it was, even at fractions of a cent. Many argue that there’s no reason for serious developers to start building on the chain, and those currently involved seem to view it more as a hobby than a serious investment.
Tale of three acts? Or actions?
The Terra community also recently approved a proposal introducing a 1.2% tax rate on every transaction. A community forum requested more than 19.5 million Luna for an airdrop for users who didn’t receive a proper allocation of the token when Terra 2.0 launched
Luna Classic, the native token of the notorious Terra blockchain that imploded in May, has gained about 116% in price over the past 7 days, according to data compiled by Blockworks.
Luna Classic developer teams have migrated to Terra’s relaunched version or other blockchains such as the Polygon and Cosmos ecosystems, and serves primarily as a speculative meme coin, yet its market cap is currently about three times that of the new Luna tokens.
Many are critical of Terra blockchain’s revival attempt after its algorithmic stablecoin TerraUSD dramatically depegged from the US dollar — leading to a crypto industry meltdown and the insolvency of multiple crypto lending firms.
Our Take
Genuinely a case of who knows. The saga has clearly not ended and what turns and machinations occur next is anyone’s guess, but the smart investor may be the one who anticipates and embraces chaos rather than fears it. Especially in the crypto world.