What happened to Luna Coin, and is investing in it still a good idea?
The crypto markets resemble a dynamic ecosystem that is constantly evolving. Every day, new cryptocurrencies with improved protocols are released. On the other hand, if older ones want to remain competitive in the market, they must keep up with the pace and new technology.
It’s a dog-eat-dog world out there, and if your project doesn’t meet the standards of the day, your cryptocurrency may just vanish into nothingness. One may assume that the cryptocurrency Luna has experienced this. It is no longer listed on coin aggregators and trackers, and even its website now produces a 404 message.
What transpired to Lunacoin then? Did it just abruptly vanish from the markets? That is not conceivable, as you should be aware if you are conversant with blockchain technology. The coin should exist someplace as long as there are token holders and a blockchain.
This essay aims to explain what happened with Lunacoin and assess its suitability as an investment. In order to do this, we will discuss certain fundamentals, go through the fundamentals of Luna, and attempt to anticipate the price of Luna Coin.
What is Luna Coin?
According to the white paper for Terra, the creators wanted to make sure that Bitcoin achieved its initial purpose of being a peer-to-peer electronic payment system. To do this, Terra uses a system of stablecoins, which are digital currencies whose value is tied to other assets like commodities or fiat money.
The most widely used of these, UST, reflects the value of US dollars, with one UST token often trading at or near the $1 level. The other token in the ecosystem, LUNA, is used to accomplish its peg to the dollar.
The price of the Terra stablecoins can check on KuCoin, which also helps to keep market volatility to a minimum.
Over the past year, the LUNA price has increased dramatically. LUNA began trading at $0.66 in 2021 and ended the year at $89. Later, on March 9, 2022, when most other cryptocurrencies were plunging along with the world’s capital markets as a result of the Ukrainian invasion crisis, it reached its all-time high of $104.58.
With a market worth of over $15 billion, UST has grown from relative obscurity to rank after tether (USDT), USD coin (USDC), and Binance USD (BUSD) as the fourth-largest stablecoin.
How does UST Function and What is It?
A special kind of cryptocurrency called a stablecoin has a price that is fixed, often to a state-issued fiat currency like the dollar. The way that stablecoins on the Terra blockchain maintain price stability sets them apart from other coins.
Instead of relying on a reserve of assets to maintain their peg, as USDC and USDT do, UST is an algorithmically stabilized coin. This entails utilizing a smart contract-based mechanism to maintain the price of TerraUSD (UST) at $1 while minting (creating) additional UST tokens by burning (permanently destroying) LUNA tokens.
How Does it Function in Practise?
Arbitrage plays a role in everything. This typically refers to the method of generating modest profits by identifying differences in asset values across several exchanges. However, it functions significantly differently in the cases of LUNA and UST.
No matter what the current market price of ether tokens is, users may always exchange their LUNA token for UST in the Terra ecosystem at a fixed price of $1. This is significant because it means that LUNA holders may exchange $1 of LUNA for one UST token, which in this case is worth more than $1 owing to an increase in demand, and pocket a risk-free profit if demand for UST increases and its price climbs over $1.
A portion of the LUNA is burnt (permanently removed from circulation) during the switching procedure, and the remaining amount is placed into a communal treasury. The treasury’s funds are then invested in programs and services that increase the usefulness of the Terra environment.
By burning a portion of the total supply, LUNA tokens become more valuable because there are fewer of them remaining in existence. It has the effect of diluting the already-in-circulation tokens and lowering the total price back down to its $1 level by issuing more UST tokens.
Similarly, if demand is low for UST and the price falls below $1, UST holders can exchange their UST tokens at a ratio of 1:1 for LUNA – which is worth more because of their scarcity and so the user can bank another risk-free profit.
LUNA Coin can Exist in Three Different Status:
- Coins are staked or assigned to a stake pool when they are bonded. These are restricted from free trade and locked up to gain rewards.
- Currency that is freely exchanged but not subscribed to a stake pool.
- Coins that have been removed from staking or delegation are known as unbonding. It takes 21 days to finish, and during the waiting time, it cannot be cancelled.