What is Terra (LUNA) cryptocurrency? A comprehensive guide

Terra (LUNA) is a cryptocurrency powering the Terra network, facilitating stablecoin transactions and decentralized finance (DeFi) applications.

Apr 27, 2024 - 11:34

Terra (LUNA)

Recently, the price of Terra LUNA has sharply declined. In May 2022, Terra Luna was valued at $120, and its blockchain surpassed Solana to become the sixth-largest cryptocurrency, boasting a circulating supply of nearly $19 billion. Despite being the third-largest stablecoin after USDT and USDC, its sudden drop to a fraction of a cent was unexpected. Subsequently, a completely new blockchain emerged after the crash, sparking curiosity about the nature and distinctions of Terra (LUNA) cryptocurrency from its original form.

What is Terra (LUNA) crypto?

LUNA is the native token of the Terra blockchain developed by the Korean firm Terraform Labs. The crypto's development was funded through the private sale of LUNA coins, which raised a total of $32 of investments that came from centralised sources, like Binance, Huobi and OKX. The entrepreneur and investor Daniel Shin headed the founding team that launched LUNE in 2019. When it was released, LUNA was one of the most successful decentralised finance coins, ranking seventh by market capitalisation on CoinMarketCap. However, following the price drop, LUNA slumped to the 214th as of 1 June 2022.

LUNA crypto explained

Let's delve into our Terra crypto analysis by elucidating the essence of LUNA crypto. According to Terra's white paper, the founders aimed to introduce a peer-to-peer cash system akin to Bitcoin's original vision. To realize this objective, Terra employs a stablecoin mechanism, where cryptocurrencies' values are closely tied to various assets like fiat currency or commodities.

Among these stablecoins, UST stands out as one of the most prominent, mirroring the value of the US dollar, typically priced at around $1 per UST token. This stability against the dollar is achieved through the utilization of another token within the ecosystem, namely the LUNA stablecoin, which plays a pivotal role in maintaining Terra's price equilibrium and mitigating market volatility.

Over the past year, the price of the LUNA token has witnessed notable fluctuations. Beginning at $0.66, it concluded the year at $89. In March 2022, amidst a downturn in the prices of many other cryptocurrencies due to geopolitical events such as the Ukraine conflict, LUNA reached its all-time high of $104.58.

Does LUNA function as a stablecoin?

Stablecoins represent a distinct category of cryptocurrencies, tethered to government-issued fiat currencies like the US dollar. Nonetheless, stablecoins within the Terra blockchain employ a unique approach to price stabilization. Unlike USDC and USDT, relying on asset reserves, UST operates through algorithmic stabilization. It utilizes smart contract algorithms to maintain a $1 price by burning LUNA tokens to generate new UST tokens.

Here's how it functions: Through arbitrage, exploiting slight price differences across cryptocurrency exchanges, though with a twist in the Terra ecosystem. Users can exchange LUNA for UST and vice versa at a fixed $1 rate, irrespective of prevailing market prices. If UST demand surges, causing prices to exceed $1, LUNA holders profit by exchanging $1 of LUNA for UST tokens.

During this exchange, a portion of LUNA is permanently removed from circulation, with the remaining deposited into a community treasury. These funds are then invested in applications and services to expand the Terra ecosystem. By burning LUNA tokens, the circulating supply decreases, enhancing their value, while minting more UST tokens dilutes existing assets, maintaining the $1 price. Conversely, if UST demand diminishes and prices fall below $1, holders can exchange UST for LUNA at a 1:1 ratio.

UST stands as a pivotal stablecoin within the Terra ecosystem, although other stablecoins pegged to various fiat currencies also exist.

TerraCNY represents the Chinese yuan.
TerraEUR signifies the euro.
TerraBGP denotes the British pound.
TerraJPY stands for the Japanese yen.
TerraKWR represents the South Korean won.
TerraSDR denotes the International Monetary Fund's Special Drawing Rights (SDR).

However, unlike the other units, the International Monetary Fund's SDR is inaccessible to the average user and cannot be utilized for purchases. It serves as an international reserve asset, calculated based on a basket of various fiat currencies from the world's largest economies.

How does LUNA work?

The Terra blockchain seeks to blend the decentralized nature of cryptocurrencies with the stability of fiat currency through its creation of stablecoins. Central to this ecosystem is the LUNA token, often referred to as a staking token.

Utilizing a dual-token system between UST and LUNA, the Terra blockchain operates by minting UST through the burning of LUNA. If the value of UST surpassed $1, an equivalent amount of LUNA would be burned, thus decreasing the value of UST by increasing its supply. Conversely, if the price of UST fell below $1, tokens were exchanged for LUNA, enhancing the value of UST.

Before the crash of LUNA in May 2022, there existed a circulation limit of 1 billion coins; exceeding this threshold resulted in LUNA being burned. However, by June 1, 2022, the original LUNA underwent a name change to LUNC and had a circulating supply of 6.5 trillion.

What purposes does LUNA cryptocurrency serve?

LUNA, a cryptocurrency coin operating on the Terra blockchain, facilitates the creation and exchange of digital assets. Serving as the native token of the Terra blockchain, LUNA is utilized for covering transaction fees and incentivizing network participation.

Businesses accepting such coins allow LUNA to be used for purchasing goods and services. Unlike some cryptocurrencies, LUNA coins are supported by other stablecoins, ensuring relative price stability.

Beyond online transactions, LUNA coins have diverse applications. Apart from lending, borrowing, insurance, and investment, they are also suitable for charitable purposes.

Is investing in Terra (LUNA) cryptocurrency advisable?

Following a dip to $0.12 on March 18, 2020, the LUNA coin witnessed remarkable growth, emerging as one of the top-performing cryptocurrencies, with a substantial increase of approximately 76% over the past few years. By March 2022, LUNA had secured the seventh position in terms of market capitalization.

As for whether Terra (LUNA) crypto is a sound investment, it's crucial to acknowledge the inherent risks associated with investing, given the unpredictable nature of market trends and the uncertain trajectory of cryptocurrency prices. In the case of LUNA, its price suffered a decline following the UST crash. Speculation remains regarding whether the coin will regain its previous all-time high. Predicting future price movements relies on analyzing the coin's historical performance.

Engaging in thorough market research before making any investment decisions is advisable.

Terra price analysis

As of the time of writing on September 26, 2022, Terra (LUNA) was priced at $2.73, with a 24-hour trading volume of $547,921,624. Over the past 24 hours, Terra (LUNA) had experienced an 11.78% increase in value. According to CoinMarketCap, the cryptocurrency held the #97 ranking, boasting a live market capitalization of $347,733,271 and a circulating supply of 127,475,474 LUNA coins.

Following a recent price crash, confidence in LUNA among traders and investors dwindled. Nevertheless, many believe that the introduction of the new blockchain will contribute to Terra's price recovery in the near future.

Observing the provided chart, one can note a notable price surge depicted by the candlestick. However, the current candle (as of September 26, 2022) appears red, signaling a slight apprehension among investors. Nonetheless, compared to its initial market days, the coin's price stability has notably improved.

LUNA future price

When discussing Terra (LUNA) cryptocurrency and its future price projections, many traders and analysts view the project as highly promising, anticipating significant growth. However, the certainty of whether LUNA is a sound investment or its future performance remains uncertain, as numerous factors can influence the stablecoin's price trajectory.

In the years ahead, Terra (LUNA) may garner increased attention from investors, potentially leading to a rise in its price. There are several reasons why many cryptocurrency analysts find Terra (LUNA) to be an appealing digital asset.

Firstly, it holds considerable potential as a medium of exchange and payment. Secondly, having already secured a place in the top 10 cryptocurrencies, its past accomplishments cannot be disregarded.

Moving forward with our discussion on Terra (LUNA) cryptocurrency, let's delve into short and long-term price predictions.

While optimism prevails among many crypto traders regarding Terra (LUNA)'s future, TradingBeasts predicts a decline in LUNA's price to $0 in 2023, rendering it an unfavorable investment choice. Conversely, WalletInvestor forecasts a price drop to $0.70066 in 2023. Similarly, PricePrediction.net also anticipates a decline, projecting a drop to $0.175165.

Predictions for Terra (LUNA)'s price in 2024 mostly lean towards positivity. PricePrediction.net and WalletInvestor expect the coin's price to range between $2.955909 and $2.955909. However, TradingBeasts presents a different perspective, suggesting the possibility of the price reaching $0 in December 2024.

According to DigitalCoinPrice, Terra (LUNA)'s price is predicted to surge to $105.05 by 2025. Gov.Capital holds a significantly more optimistic outlook on the cryptocurrency's future price, forecasting it to reach $753 by the end of 2025.

Regarding the long-term forecast for Terra (LUNA) coin, Price Prediction foresees a price of approximately $0.30 at the outset of 2030. CoinPriceForecast's analysts express confidence in LUNA's price strengthening, projecting it to rise to $380 by the close of 2030.

Pros and cons of Terra investing

Investing in Terra (LUNA) could be appealing to many, yet every investment opportunity has its ups and downs. Apart from the numerous benefits associated with investing in Terra (LUNA), there are also several disadvantages to take into account. Let's examine the primary advantages and disadvantages of purchasing Terra (LUNA).

Pros	Cons
Terra (LUNA) enjoys support from numerous cryptocurrency exchanges and platforms.	Stablecoins have the potential to result in failure.
In addition to LUNA, Terra boasts several other notable projects, including UST, Mirror, Anchor, Terraswap, and Chai.	Terra's stablecoin carries risks due to regulatory opposition faced by other stablecoins.
The transaction fees are typically minimal, ranging from 0.1% to 1%.
The user interface surpasses that of other cryptocurrency applications.

How to buy Terra crypto?

To purchase Terra (LUNA), you'll need to locate a cryptocurrency exchange platform that supports this emerging digital asset. Given its increasing popularity and demand, many leading crypto exchanges now offer Terra (LUNA), providing you with options based on factors such as pricing, user-friendliness, investment tools, and other preferences. Let's explore some of the most widely-used cryptocurrency exchanges where Terra (LUNA) is available for purchase.

To acquire Terra (LUNA) coins, start by visiting the official website. From there, you'll need to create an account, providing your details and payment information. You can then deposit funds or directly purchase the coin using a debit/credit card.

Where can I purchase Terra?

Now that we have an understanding of "what is Terra (LUNA) cryptocurrency?" and its functioning, let's explore where it can be purchased. Here are a few examples of exchanges where Terra (LUNA) coins are available: