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Following the TerraUSD Crash, Is Now a Good Time to Buy Luna?

If you want proof that cryptocurrency is more about financial speculation than investment in projects that actually have long-term viability, look no further than what’s happening with Terra (LUNA) right now. LUNA may have crashed by 100% in the wake of the TerraUSD (UST) collapse, but it appears to be attracting attention from traders who want to make a quick buck, with the altcoin rising by over 16,000% since reaching an all-time low of $0.000000999967 on May 13.

In fact, reports from South Korea suggest that (Korean) retail traders are now rushing into LUNA, with the coin’s fraction-of-a-dollar price leading more than a few people to suspect they could make a killing if it were to lead a sustained recovery. However, a sober appraisal of the current situation affecting Terra would suggest that LUNA’s chances of a long-term recovery are very low, and that the window of opportunity for making a killing from its dead-cat bounce has now closed.

Luna has never been cheaper but does that make it a good deal?

Is Now a Good Time to Buy LUNA?

If you’re clairvoyant, or have an uncanny knack for timing, now may be a good time to invest in LUNA. Not only has it risen by a whopping 16,960% since crashing to an all-time low, but it has also experienced some notable surges since.

For example, it rose as ‘high’ as $0.000585 on May 14, meaning that if you had bought at its all-time low and sold at this level, you would have made over 50,000%.

Source: CoinGecko

Needless to say, it fell back down from this short-term high. But day traders who could time their entries and exits perfectly may have been able to benefit from subsequent troughs and peaks. Such as when the altcoin rose to around $0.0002 on May 22 (and May 23), having been only $0.0001 a day previously. This is a rise of 100%, so while it obviously isn’t as big as the 50,000% jump mentioned above, it’s still much better than any conventional asset — and most major cryptocurrencies — can offer right now.

Aside from day traders and (possibly) manipulative whales, such spikes are being driven by retail traders hopeful that LUNA could recover. The reasoning is that, since the altcoin is so cheap, it’s worth buying $100 worth in case it rises to something like its original price.

“Luna was once a major coin of top-ten market capitalisation, so they will do whatever it takes to revive it,” wrote one Korean investor, quoted by Reuters.

Likewise, a perusal of Crypto Twitter will find no shortage of traders and ‘Luna Army’ members predicting that LUNA will rise up like some kind of financial phoenix.

Source: Twitter

No doubt forecasts of a recovery are largely wishful thinking, with some holders even sending their LUNA to wallets to be burned, in the belief that this will reduce the coin’s supply enough to raise the price.

Source: Twitter

Despite the fact that there’s lots of desperation out there, expectations of a LUNA recovery have been buoyed by the plan which has been proposed by Terra founder Do Kwon and put to a community vote. This would fork the existing Terra blockchain, creating a new chain with only LUNA, and renaming the previous chain (which also includes the failed TerraUSD stablecoin) Terra Classic.

Numerous apps and projects on Terra have voiced their support for this proposal, meaning that it is likely to go ahead. However, 90% of voters in a preliminary vote on the plan voted against it, while only 65.5% are currently in favor of the latest, amended version.

It now appears that Terra 2.0 will be airdropped to former Terra 1.0 holders on May 27 but it’s unclear exactly how the launch will go. By extension, it’s far from certain that LUNA will see a significant price increase.

The Crux of the Matter? Credibility

Even assuming that the Terra blockchain does fork into a new chain, there’s still no certainty that enough people and projects will be willing to use it. Because now that TerraUSD has collapsed spectacularly, it’s hard to believe that much of the wider cryptocurrency sector will have trust in the new Terra.

Not only that, but without TerraUSD itself, there doesn’t seem to be much of a rationale for LUNA. Prior to the crash, the bull argument for LUNA was that it was burned whenever new UST was minted, meaning that the expanding supply of UST would result in LUNA becoming more scarce. In turn, this would make LUNA deflationary and more valuable, a dynamic which caused investors to flock to LUNA, believing it was a relatively safe bet in an often volatile market.

However, without the UST stablecoin to support, what is LUNA for? Neither Do Kwon nor Terra more generally has really answered this question. And without a convincing answer, it’s hard to imagine that LUNA can rally to anything like its former level.

Of course, there’s almost no way LUNA will ever return to its current all-time high of $119.18. The reason for this is simple: this record high was set when its supply was around 750.5 million. Now, the supply of LUNA is a whopping 6.9 trillion. This means that, at a price of $119, LUNA’s market cap would rise to around $700 trillion.

Obviously, this isn’t going to happen. Even assuming that LUNA recovered its former cap of roughly $40 billion, this would imply a price of $0.00579.

LUNA is currently worth $0.00017, meaning that if you bought now and LUNA reached its best-case target, you would make a profit of about 3,300%.

Obviously, a 3,300% profit would be great in anyone’s book. But bear in mind that LUNA’s high during its post-crash existence has been only $0.000585. If it were to reach this level again, someone buying now would make 244%.

Again, this would be a great profit if you could actually make it, but there really is now guarantee that Terra’s recovery plan will rehabilitate confidence in LUNA. And with trading volume down compared to previous months, it seems that the trend for buying LUNA cheap may be slowing down.

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CryptoVantage Author Simon Chandler

About the Author

Simon Chandler

Simon Chandler is a journalist based in London. He writes about technology, markets and politics, and has bylines for Forbes, Digital Trends, CCN, Wired, TechCrunch, the Verge, the Sun, the New Internationalist, and TruthOut, among many others. His Twitter handle is @_simonchandler_

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