What happened to the Terra project with its cryptocurrency Luna?
What happened to the Terra project with its cryptocurrency Luna?

What happened to the Terra project with its cryptocurrency Luna?

By Marco Cavicchioli - 14 Oct 2022

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In May there was a huge stir over the outright implosion of the Terra project and its Luna cryptocurrency. 

It was an ecosystem based on an algorithmic stablecoin called UST. When its value suddenly and widely dropped below $0.99 on 10 May, the whole house of cards collapsed. 

Yet the project is actually still alive now.

Actually, there are even two Terra ecosystems in existence today, although by no means comparable to the one that imploded in May. 

The future of the Terra project and the LUNA crypto

Before the implosion, LUNA’s market capitalization was just under $30 billion, while today neither of the two new Terra projects exceeds $2 billion

But to understand why there are now two Terra ecosystems, we need to take a step back and tell what happened after 10 May. 

The UST algorithmic stablecoin was being held stable at about $1 by an automated system that created and burned LUNA tokens. When the system imploded this mechanism went crazy, generating over 6.5 trillion tokens in a very few days. Before the collapse, only 345 million existed. 

Once created, this huge amount of tokens not only almost wiped out the value of those that existed before, but also made it very difficult to get rid of them. In fact, although there has already been a burning program in place for months now, very few have been burned to date, as the current circulating supply is 6.888 billion tokens, compared to 6.907 created in total since the project has existed. 

When the project management team realized that it was not possible to simply bring everything back to the initial situation, they decided to abandon it and create a new one. 

But as often happens in such cases, not everyone who was using Terra’s old decentralized protocol decided to abandon it and switch to the new one. 

So in fact the old, imploded ecosystem was taken over by a new team of developers who are keeping it alive to this day with the goal of burning as many tokens and trying to get it working again in much the same way as before. 

At that point, however, a problem arose, namely that of the name. In fact, the previous team when creating the new ecosystem also took the original name with them, so today the name Terra is commonly assigned to the new project created in late May, while the original ecosystem was renamed to Terra Classic. 

The cryptocurrency was also renamed, with the old one taking the name LUNC (Luna Classic), while the one created in late May took back the name LUNA. This unfortunately creates a lot of confusion, partly because there are often still those who refer to the old cryptocurrency by its former name, Luna, instead of the new one, LUNC. 

To make these assets even more recognizable, the stablecoin has also been renamed to USTC (TerraClassicUSD), although on the new ecosystem for now there is no trace of it. 

The coexistence of Terra and Terra Classic

Therefore there are two Terra ecosystems, one called Terra Classic, which is the original that imploded in May, and a new one called simply Terra. 

There are also two Luna cryptocurrencies, one called LUNC (Luna Classic), which is the original one imploded in May, and a new one called simply LUNA. 

In contrast, there is only one algorithmic stablecoin, the old UST renamed USTC, although it is now no longer a stablecoin since its value imploded. 

The old team that created the new Terra ecosystem is basically the same as before, headed by that Do Kwon who is currently wanted by the police. This casts a somber shadow over the future of this new project. 

In contrast, the new team that took over the management of the old ecosystem, now renamed Terra Classic, is different, but according to some of their statements, the future of Terra Classic also looks bleak. 

In fact, they have stated that they intend to bring UST back to $1 in the long run, but currently, this seems virtually impossible. That is, their statements are very dubious in nature. 

Following the May collapse, UST, although it should now be called USTC, fell as low as $0.006 in June, although it has actually recovered a little bit since then. In fact, its current market price is $0.048, or eight times the June low. 

However, it is still 95.6% below the original $1, and to recover that level from the current price it would have to make a resounding and incredible +1.980%. These are unthinkable growth rates for what is supposed to be a stablecoin. 

Moreover, this plan involves burning an immense amount of tokens, and it is very difficult to imagine that the team now running the Terra Classic project would be able to find so many USTC tokens to burn. 

Before the May crash, the UST tokens that were then in circulation had come to be about 18.7 billion, while now they are down to 9.8 billion. However, it is worth mentioning that the bulk of the burns were done right at the end of May, with a tail-off in early July. Since then, only 5 million have been burned out of more than 9.8 billion. 

In short, the numbers don’t add up: at this rate it just seems unthinkable that USTC could return to $1. 

The old LUNC and the new LUNA

The argument is still different for LUNA and LUNC. 

As for the old cryptocurrency LUNC (Luna Classic) in May, the collapse was even more resounding, because it went from $86 to $0.0012 in just one week. Then again, with the creation of 6.5 trillion new tokens in a few days, compared to a previous supply of 0.345 billion, their market value could do nothing but implode. 

In the following months, the de facto price continued to fall and lateralize, until it hit $0.00004 in June. It had basically lost 100% of its initial value. 

Starting in late August, however, it had a small rebound. It was actually a huge jump in percentage from the June lows, but nowhere near enough to recover all the lost ground. 

Today its market price is below $0.0003, which is about 100% lower than the April highs, but 650% higher than the June lows

Nonetheless, it is still a purely speculative cryptocurrency, although there is a slight chance that it could become something concrete again. 

The new LUNA, on the other hand, has had a somewhat less battered history. Then again, it was born in late May, which is after the implosion of the old Terra ecosystem. 

Its all-time high was reached on the same day of its launch, i.e., 28 May, when it touched $19. By 9 June, however, it had already dropped to about $2, and since then it has not been able to exceed $3 except on rare occasions. 

Actually, on 11 September it even exceeded $6, but that was only a flash in the pan. 

Its current value, $2.7, is always within the swing range between $2 and $3 within which it has been lateralizing since June, and is still 85% below the all-time high of late May. 

In theory, there should be a concrete project behind the new Terra project, and the new LUNA cryptocurrency, as a continuation of the previous one, but in reality, not many concrete steps forward have been taken over the months. Moreover, Do Kwon’s judicial problems do not help at all the development of this project, which is starting from a foundation that is not at all solid and has far from rosy prospects. 

Marco Cavicchioli

Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".

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