can the Terra crypto project go back into effect?

Updated on August 31. 2022 at 4:26 PM

Terra is back! Its crypto LUNC is seeing its value rise as announcements are made public. Strike, intensive burn system, hyperinflation and support from Binance seem to be waking up the community and investors are still stunned by the violent crash that happened a few months ago.

How to Respond to LUNA and UST . Crypto Crash

The reasons for the Terra crypto ecosystem crash

The complete Terra ecosystem

Founded in 2018, the Terra blockchain has managed to build an entire ecosystem around it. The latter consisted of its own crypto LUNA and the dollar-backed stablecoin UST.

These two cryptocurrencies were intrinsically linked. The UST which should be worth about $1 was supported by the counterbalance of the value of the LUNA. Simply put, it was possible to exchange $1 worth of LUNA for 1 UST. Thanks to these operations, the exchanged LUNA tokens were systematically burned. The This is how LUNA stocks remained under control just like its value.

The case of the UST is interesting because it was one of the first algorithmic stable coins to enter the market. Most classic stablecoins such as Tether (USDT) rely on real-world assets such as bonds or fiat. However, the UST operated respectfully to a system of minting and burning tokens with the aim of:balance token offer and de facto control its value.

the token CN, used by the Anchor Protocol’s lending protocol, was also a token of the Terra crypto ecosystem. The latter relied on the UST stablecoin to offer attractive loans with yields of up to 20%.

The panic blocked the Terra mechanism

After an extraordinary year 2021 in which Terra (LUNA) had risen to one of the most important crypto projects, the mechanics of the ecosystem, however well thought out, came to a halt in early May. With this, the entire crypto market collapsed and lost billions of dollars in losses within hours.

A wave of widespread panic forced the holders of LUNA and UST to… sell their tokens en masse. These liquidations started on the Curve platform. The counterweight mechanism could not play its part. With supply outstripping demand, token prices collapsed and the UST lost its peg to the dollar.

Anchor Protocol also took the brunt of the UST depeg and the depreciation of LUNA.

Within hours, this project collapse won the entire cryptocurrency marketcausing great panic.

To make matters worse, the Terra blockchain stopped working twice during the crash. Investors lost all confidence at the time and pushed the largest exchanges to remove tokens related to Terra.

LUNC: the solution to save Terra Luna?

Faced with the failure of the project, Do Kwon, one of the two founders of Terra Labs, considered numerous solutions. The community came up with several solutions to stop the bleeding. Binance CEO had even offered his help by using BTC’s reserve held by the exchange and bringing the UST back to its target value.

Do Kwon remained deaf to these outstretched hands, preferring to cling to his own idea of…perform a fork of the blockchain Soil. The idea behind this fork was to start from scratch for the CEO.

This alternative was far from unanimous within the community, as well as in the cryptosphere. Changpeng Zhao, CEO of Binance, called the move “useless and criticized the Terra Labs team’s lack of transparency.

Tweet CZ crash crypto luna - LUNC
Tweet from Binance CEO CZ on Luna’s Crypto Crash and Do Kwon’s Decisions

Despite the reluctance, the split took place, resulting in the creation of a second token. This new token was christened LUNA, its predecessor was renamed MONDAY for Luna Classic.

Always with a view to restarting the machine, LUNC DAO was created with the aim of bringing the token to the dollar’s token price.

Today, Do Kwon’s bet seems to have been a bust since LUNC (the original iteration) is shown much better performance then his successor LUNA. When the latter sees its value continuously falling, LUNC continues to grow. While its value is still relatively far from the dollar ($0.0001629 as of August 31, 2022), it is strong with a market cap of $1 billion and higher trading volumes than LUNA.

Terra Labs has also relaunched its stablecoin, renamed TerraClassicUSD (USTC), to forget its history of losses. The latter is still trying to connect to the pin of 1.

Strike resumes and LUNC crypto gains +60%

Resumption of strike for LUNC

After these long months of doubt, Terra seems to be making a slow but steady recovery. We are witnessing a renewed interest in the project and the LUNC token.

For starters, the turn off function is available again since August 26. This announcement, which many investors have been looking forward to, mobilized the crowd who rushed to the token, almost forgetting the defeat of a few months ago.

But why ?

First, the strike proposal was accompanied by a pledge from the 130 validators of make no profit of their work. Their main goal is to breathe new life into the LUNC. For that it is necessary reawaken investor interest and restore the lost faith.

They promise to throw away their wagering earnings to burn the LUNC tokens. As a result, old investors are remotivated, but new ones are also attracted.

When in doubt about the fairness of a validator, investors can easily change it at any time. Malicious validators will face immediate consequences.

Second, plan LUNC DAO a tax of 1.2% about the costs of buying and selling tokens. The goal is to intensify the token burn to create a flow hyperinflationary and thereby significantly increase the value of the LUNC. The $1 symbolic threshold can be reached quickly if the mechanism is respected.

According to the estimate made by LUNC Burn’s Twitter account, the burning of LUNC would reduce the . can reach 14 billion tokens burned daily (taking into account the value of the token at the time of the tweet).

Tweet LUNC Burn
Tweet from LUNC Burn highlighting the potential of burning at 1.2% load (as of 8/25/22)
Source : Twitter account LUNC Burn

The maximum supply target is: 10 billion tokens against 6,000 billion today.

To note

However, the introduction of the 1.2% tax should be effective from September 12.

The LUNC Token Explodes

This mechanism sets in motion a vicious circle and strongly anticipates a rise in the token.

Burning does indeed tend to play on supply and demand. So by burning tokens, that is, by destroying them, the supply becomes scarce, but the demand remains constant or even increases. The value of the token increases mechanical.

Faced with the rise in a token’s price during the Bear Market, the potential for future gains is attractive to investors who would bet on the token today. As a result, trading volumes are increasing. In turn, the number of burned tokens is increasing and as a result, we are witnessing the scarcity of the LUNC.

This is the phenomenon we are witnessing right now. Since it became accessible for staking, the token has more than . won 60% of its value.

Since opening for strike, LUNC token is up over 60%
Source: Trade View

This strong comeback from LUNC is supported by an important ally in the person of Binance. The exchange oversaw this update to Terra’s system. His participation provides credibility to the fledgling Terra Classic reassuring investors still stung by the events of last May.

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Return of Terra crypto: good news?

The issue of Terra’s return to the crypto game may give rise to the bewilderment.

First, it can crash is always remembered. Although the Terra (LUNA) project was one of the relatively safe and attractive stocks in the market, it did not resist a historic trapstorming the entire crypto sphere and plunging into a “crypto winter”.

The world market has lost several billion dollars of capital letters. The knock-on effect that followed was fatal for companies in the sector such as Celsius and Three Arrow Capital. DeFi recorded the avalanche caused by Terra head on.

On the other hand, Do Kwonthe CEO of Terra Labs, is at the heart of strong suspicions about his involvement and handling of the Terra rescue.

After the crash, the latter forgot about the strong community around Terra (LUNA) and the opinions of major players in the cryptosphere. He solved the problem himself at the expense of good communication to reassure the entire ecosystem.

Heavily criticized, he preferred to stick to his ideas disappear for a few months. This widely noted absence cast doubt on possible fraud of which the CEO would be the sponsor.

Do Kwon reappeared a few days ago. Perfect timing for improve his image along with that of his project. During an interview, he tried to defend himself in vain. Especially as the accusations continue through social networks, with some emphasizing theSouth Korean research against a former employee of Kwon.

However, since May, the situation has changed. The community has taken over to the project. The return of Terra, seen as the rebirth of the Phoenix, is due to the dedication of this one. All players in the network seem committed to: rebuild the ruins of the project.

The promise of validators to sacrifice their profits and the Binance Support in the process are important assets for the rest of the events. In addition, exchanges tend to relist the tokena very positive sign for LUNC.

While it’s early to say, Terra appears to be coming back from the dead to reclaim her place in the Top 10. It will undoubtedly take time.

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