LUNA prices had one of the best performances in the year 2021. However, LUNA crashed drastically due to a fundamental flaw in how it sustained the UST stablecoin. The latter was dependent on the entire cryptocurrency market, which recently crashed heavily. Today, the Terra community received major news which aims at reviving the Terra project. Will Terra fork into Terra 2.0? What will happen to LUNA after the news?
What is Terra Crypto project?
Terra is a blockchain protocol that used stablecoins to enable price stability in global payment networks. In fact, they claim to combine price stability and fiat currencies by enabling Bitcoin (BTC), thus offering cheap settlements. Volatility was a highly discussed topic in the cryptocurrency realm. It is one of the main reasons that made investors fear owning cryptos. Terra sought to change that by using crypto-pegged stablecoins. They would keep a “one stablecoin to one crypto” peg through a proprietary algorithm that automatically adjusts stablecoin supply based on its demand. This is feasible thanks to their token LUNA, which provides liquidity, price stability, and was easily swappable to other stablecoin at profitable exchange rates.
Why did Terra LUNA fail?
Since Terra had a 1:1 peg with fiat and cryptos, prices were heavily dependent on the stability of the cryptocurrency market. However, since November 2021, the crypto market crashed by more than 50%. This created fear in the crypto market, where many investors started to liquidate their crypto portfolios, creating a “snowball effect”. This led to the de-peg of UST, and the deterioration of the token LUNA, as its prices crashed by 99.99%.
What is Terra 2.0?
The founder of Terra “Do Kwon” was pretty active throughout the downfall of the project. He did promise that they are working on a potential “fix” that aimed at solving the UST crash and bringing back trust to the Terra ecosystem. However, this solution was in vain and nothing materialized.
Following this failed recovery plan, Do Kwon had yet another plan. This time, he proposed to move the entire blockchain to a new version, built from the ground up with enhancements to the code. The new blockchain will be Terra 2.0, while the new token ticker will be $LUNA.
The previous Terra 1.0 will become the classic blockchain, with the old token called LUNA Classic $LUNAC. The entire LUNA community seemed behind the proposal, as it passed with a positive vote of 65%. Many projects are already rebuilding on top of Terra 2.0.
Terra Governance Prop #1623 has our full support.
Let's rebuild.@stablekwon @TerraBuildersU#TerraIsMoreThanUST https://t.co/o4vTm3J4ON
LUNA Price Prediction – Will LUNA prices increase again?
Following this news, it seems that there is a renewed hope for the project. Many crypto enthusiasts see this opportunity to enhance the code in order to reach true decentralization. Most crypto projects that built on Terra are willing to rebuild on Terra 2.0. From a technical perspective, we can see how LUNA prices soared on the news of a new blockchain being developed.
Should you buy LUNA now that things are turning better? Well, it’s hard to predict how successful the community will be able to turning things around for Terra. If you’re willing to gamble on a failed project trying to recover, there is certainly room for that. In figure 1, we can see how prices hit their current low and are starting to pick up. However, a good SL area would be around $0.0002.
