If you believe in miracles: Is Terra Classic a good investment?

Crypto enthusiast Jamen Mendes speculated whether Terra Classic is a good investment and how the coin will grow in the future. In his opinion, the new version of the year’s most failed cryptocurrency has several advantages that can take it to the next level. However, it is still hard to judge whether it is enough to override all past failures and conquer the market. In this regard, he makes the following conclusions.

Terra’s collapse

The cryptocurrency Tera (LUNA) suffered as part of the crypto winter. Recall that the coin collapsed because Terra’s protocol algorithmic stablecoin called TerraUSD (UST) ceased to be pegged to the dollar.

On April 5, the LUNA token reached a historical high of $119.18, but on May 13, it collapsed to a low of $0.0000999967, losing 100% of its value. On August 29, 2022, the LUNA token was trading at $0.000133, up 6.25% in the last 24 hours. LUNA’s capitalization is only $881.8M. Before the crash, the coin was one of the top 10 cryptocurrencies by market capitalization; today, LUNA ranks 213rd on that list.

As we mentioned earlier, the collapse of LUNA is because the UST stablecoin, which is part of the Terra ecosystem, has lost its peg to the USD. UST is pegged to the base price of the USD, but it has no cash backing. It needed the LUNA coin, which served as a reserve along with BTC, to maintain its price.

Simply put, it worked like this: the user needed to burn $1 worth of LUNA cryptocurrency to create UST, which typically ranged in value from $0.99 to $1.1. Market participants used these price fluctuations to arbitrage (buying one asset at a lower price and converting it into another).

The UST lost its peg to the dollar several times in May 2022. The first occurred on May 8 amid a significant outflow of assets from the Terra-based Anchor protocol, which was associated with a lower rate of return from deposits.

Declining reserves and heavy selling pressure exacerbated the situation. By May 12, the UST price had fallen to $0.37. Following it, LUNA finally collapsed as well. Additional negative impact on tokens had a general decline in the crypto market.

And now, the coin is traded on exchanges under the new ticker Terra Classic (LUNC). The ticker of the UST stablecoin has also changed — now, it is called TerraClassicUSD (USTC).

Five advantages of LUNA Classic

LUNA’s prospects against the background of what happened to seem sad. The crypto community has lost confidence in Terra and algorithmic stablecoins. However, many investors have been increasingly interested in Terra Classic lately, and according to Jamen Mendes, there are five reasons for that:

1. the most encouraging and optimistic feelings in the market;
2. one of the biggest crypto crowds;
3. a new and loyal development team, Terra Rebels;
4. a powerful token supply reduction mechanism;
5. the lowest Layer 1 price in the entire cryptocurrency market.

In terms of technical equipment, the project team has prepared a number of powerful updates, all of which have been adopted and merged by Terra Foundation. Among them, for example:

• a 1.2% burn tax;
• a staking function;
• a new code that is available to node operators and validators.

Now, given the low cost of the coin, it is available to many investors. If someone were to buy $100 worth of LUNC and the price of the cryptocurrency rose to at least $1, that person would immediately become a millionaire. Sounds unrealistic, but it’s a chance. According to the author, similar results cannot be achieved even in the case of ETH, DOT and ADA, given their current prices.

What will happen to LUNC?

On the one hand, long-term investments in Terra Classic seem like a sensible option. As a result of price dynamics and forecasts, the coin’s charts will rise and fall in the future. On the other hand, cryptocurrencies are unstable. Consequently, any predictions are hypothetical.

However, it is possible that despite several updates, LUNA has remained the same LUNA. Many investors are skeptical about the update. And the fact is obvious, how recently many investors’ money simply disappeared. The popularity of the “original” coin at the very start was explained by the users’ interest in the new project with a cool name and well-known developers at the helm. Everything repeats, so we can’t be sure how honest the developers of LUNA Classic are.