LUNA 2.0 Debut Experiences Hiccups as Price Plummets, Will Trust Remain Robust?

LUNA 2.0 has been on a rocky start based on a sharp price decline after Terra 2.0 successfully went live on May 28.

The price hit highs of $18.87 but later nosedived to lows of $5, according to CoinGecko. In the first 30 minutes of trading, LUNA 2.0 shot up to $30 from $0.30 on crypto exchange ByBit, but this peak was short-lived because it nosedived to $5.30 in a span of three hours.


With a total supply of 1 billion coins, the price was hovering around $6.28 during intraday trading, according to CoinGecko.


Terra 2.0 came to the limelight as a revival plan of the troubled Terra ecosystem after its native tokens LUNA and UST crashed. 


Mid-last week, the Terra community passed the Terra 2.0 proposal because it was deemed the genesis of a new blockchain that could see the continuation of the ecosystem despite the drawdowns experienced.


How will trust play out? 

With various crypto exchanges like Kraken, KuCoin, Nexo, Bitrue, ByBit, and Bitfinex already listing the LUNA 2.0 token, it remains to be seen how trust plays out in the network despite a rocky start.


Market analyst under the pseudonym Tajo Crypto explained:

“The people who have actually made money from LUNA 2.0  are those that received airdrops and sold. But I won’t call it gains because the majority of the supply is still vested. Then lots of exchanges have made lots of money from trading fees. LUNA 2.0 will be profitable if it succeeds.”

Therefore, Tajo Crypto noted that the selling pressure experienced in LUNA 2.0 was driven by the urge of some investors to recover losses made when the ecosystem crashed.


With the old chain renamed Terra Classic (LUNC) and the new one Terra (LUNA), Tajo Crypto believes a wait-and-see approach is playing out. The analyst added:

“Some people are holding the Luna Airdrop hoping that Terra 2.0 will go to the moon. While some people had to sell to recover some of their losses from Luna classic. There are also those not sure of what to do yet. Whatever you decide, you might be right. No one knows tomorrow.”

Therefore, time will tell how the Terra network progresses, given that the proposal to burn 1.3 billion UST tokens was recently approved. 


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LUNA and UST Crash Could Have Been Averted if Bitcoin Reserves were Used Earlier, Binance CEO Says

The collapse of LUNA and UST, the native tokens of the Terra network, could have been avoided if the Luna Foundation Guard (LFG) had used its Bitcoin reserves earlier, according to Binance CEO Changpeng Zhao (CZ). (14).jpg

Sharing his insights on the Binance website, CZ noted:

“The Terra team was slow in using their reserves to restore the peg. The entire incident may have been avoided if they had used their reserves when the de-peg was at 5%. After the value of the coins had already crashed by 99% (or $80 billion), they tried to use $3 billion to do the rescue. Of course, this didn’t work.”

Things started going wrong when the price of the algorithmic UST stablecoin experienced a free fall to the extent that it hit lows of $0.225 from its $1 peg.


Later on, LUNA sent shockwaves to the crypto market because it nearly lost 100% of its value overnight after reaching the near-zero level. 


CZ also opined that the rain started beating the Terra network after more LUNA was minted in an attempt to salvage the situation. He pointed out:

“Printing money does not create value; it just dilutes existing holders. Exponentially minting LUNA made the problem a lot worse.”

The other flaw entailed using over-aggressive incentives like Anchor’s 20% annual percentage yield (APY). CZ stated:

“Specifically, Anchor’s 20% fixed APY to push for (in-organic) growth. You can use incentives to attract users to your ecosystem. But eventually, you need to generate “income” to sustain it, i.e., more revenue than the expenses. Otherwise, you will run out of money and crash.”

The Terra crash has triggered intense investigations on whether there was something sinister from the network founders. For instance, prosecutors indicated that they could file Ponzi fraud charges against Do Kwon, the CEO of Terraform Labs, and the face behind the Terra network.


Claims have also surfaced that Terraform Labs was dissolved on April 30, just days before the Terra tokens collapsed.

Image source: Shutterstock


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