The rollercoaster ride of Luna Classic (LUNC), the legacy token of the Terra ecosystem, has been a thrilling saga in the world of cryptocurrencies. From reaching its zenith at nearly $120 in April 2022 to experience a steep fall to well below $1 within a month, the journey of Luna Classic has been marked by dramatic highs and lows. This drastic shift was triggered by the sudden collapse of the Terra ecosystem, which sent shockwaves throughout the crypto market.
Despite the setback, Terra is far from defeated. The potential for Luna Classic’s recovery hinges on several factors, including the success of the burn program, robust community support, and the pace of protocol development. The legacy chain continues to operate under the moniker Terra Classic, with its token rebranded as LUNC.
Terra Classic has maintained its popularity, boasting one of the most vibrant communities in the crypto sphere. This community-led resilience raises a tantalizing question: Can Luna Classic claw its way back to the $1 mark?
In this article, we will dive deeper into Luna Classic, exploring its past performance, current challenges, and future prospects, and determine whether it is possible for LUNC to reach the $1 mark.
What Is Terra Luna Classic (LUNC)?
Luna Classic (LUNC) is the original token of the Terra LUNA blockchain, which remained after the recent collapse of UST/Luna and the subsequent establishment of a new Terra chain. The recovery strategy of Kwon involved the creation of an entirely new chain for future transactions. The original chain was bifurcated into the Luna Classic and the new Terra chains. Terra (or LUNA 2.0) is the name of the new chain, while Luna Classic (LUNC) is the original Terra LUNA blockchain’s native token..
The term “classic” is likely a nod to the Ethereum and Ethereum Classic hard fork that took place following the 2017 decentralized autonomous organization (DAO) breach in Ethereum. This seems to be another attempt to frame the UST crash as “Terra’s DAO hack moment,” as expressed by Kwon.
The original Terra protocol was enhanced to provide a platform for stablecoin developers to create Terra decentralized finance (DeFi) projects. The project encompassed two cryptocurrencies: Terra and LUNA. Terra was the standard stablecoin pegged to fiat and other currencies, such as TerraUSD (UST), linked to the US dollar, and TerraKRW (KRT), tied to the South Korean won.
The native token, Terra (LUNA), served as the network’s staking and governance asset. Users staked LUNA to participate in governance, become validators, and earn rewards. Users could also burn LUNA to mint Terra’s UST token or one linked to their local fiat. However, it’s crucial to understand that while these stablecoins are pegged to the value of fiat, they are not backed by fiat. Instead, the LUNA token functioned as an algorithmic stablecoin.
An algorithmic stablecoin is a type of asset that gains value through a predefined set of rules rather than being linked to a specific asset. This approach allowed Terra users to invest in the price of these coins without the need to hold their physical counterparts.
Nonetheless, the so-called stablecoin UST lost its peg on May 9, after nearly 18 months of maintaining its value against the US dollar. This decoupling triggered a domino effect that led to the crash of UST and the Terra (LUNA) cryptocurrency, impacting Bitcoin and the broader crypto sector, which is still in the process of full recovery.
Why Did Terra Luna Crash?
Before we delve into the potential recovery of Luna, it’s essential to revisit the collapse of the Terra ecosystem, which led to the creation of Terra Classic and Luna Classic.
Terra, a blockchain platform, was introduced in April 2019 by Terraform Labs, a company established by Do Kwon. The platform was centered around algorithmic stablecoins pegged to various fiat currencies. For instance, the UST stablecoin was linked to the US dollar, while the KRT stablecoin was tied to the Korean won, among others. Unlike traditional reserve-based models, Terra’s stablecoins were not backed by an equivalent amount of fiat currency or similar assets.
Instead, Terra utilized an algorithmic model involving its native token, LUNA. The platform incorporated an arbitrage mechanism that allowed for the burning of stablecoins to mint LUNA and vice versa. For example, if you possessed 10 UST, you could burn them to mint and receive $10 worth of LUNA. Alternatively, you could burn your LUNA tokens to mint and receive an amount of UST tokens equivalent to the US dollar value of the burned tokens.
This system functioned effectively for some time, and Terra experienced significant growth in 2021, largely due to Anchor, a DeFi protocol offering high yields on Terra stablecoin deposits. Users were earning an APY of approximately 20% on their UST deposits at one point.
The attractive yields in the Terra ecosystem led to substantial demand. At its zenith, LUNA boasted a market cap of $41 billion, while UST had a market cap just shy of $18.7 billion.
However, in May 2022, UST’s peg to the US dollar started to falter when the stablecoin price began to dip below its $1 target. The situation worsened on May 10, when the UST price plummeted to $0.77, indicating serious issues with its design. Despite the Luna Foundation Guard deploying their reserves of BTC and other assets to bolster UST’s peg, it failed to halt UST’s downward trajectory.
The algorithmic mechanism designed to maintain UST at $1 went into hyperactivity. Users hurried to burn their UST to mint LUNA tokens, leading to LUNA’s hyperinflation. By the end of May, UST was trading at less than $0.03, and a single LUNA token was virtually worthless.
Following the collapse of the ecosystem, the Terra project effectively bifurcated. A segment of the community chose to move away from the concept of algorithmic stablecoins, initiating the Terra 2.0 project. Conversely, another faction opted to remain with the original platform, retaining the algorithmic stablecoins. The tokens associated with the original platform underwent a rebranding, emerging as Luna Classic (LUNC) and TerraClassicUSD (USTC).
Progress On LUNC Revival Plan
The Luna Classic (LUNC) ecosystem, a remnant of the original Terra blockchain, is poised for a potential revival. A dedicated team of six engineers has taken up the mantle to breathe new life into this once-thriving ecosystem.
Latest Luna classic news reveals that a group of six engineers, self-dubbed the “Six Samurai,” have put forth a proposal for the revival of the Terra Classic ecosystem. This initiative comes as certain community members strive to distance themselves from the controversy surrounding the project’s founder, Do Kwon, and reconstruct the platform.
The engineers, jointly led by individuals known as “Bilbo Baggins” and “Solid Snake,” have proposed a governance plan that entails a three-month expenditure of $116,000 from the Terra Classic community. They assert that if the proposal is accepted, they will dedicate part-time efforts toward the project’s rejuvenation.
Samurai Six said, “LUNC has limitless upside potential, and we want to help realize it by leveraging our skills to bring value to the blockchain and all its investors in order to accomplish a true revival of the ecosystem. We’re here to provide value to the ecosystem on its road to revival, and we see ourselves as contributors to the Terra Classic blockchain, both as developers and long-time community members/investors.”
Will Luna Recover To $1?
Considering the existing supply, a $1 price for LUNC would result in a Luna Classic market cap of $5.9 trillion. Given that the total crypto market cap peaked at $3 trillion, it’s reasonable to conclude that a $1 LUNC is not a feasible expectation unless there’s a significant reduction in the LUNC’s supply.
The Terra Classic community is relying on the new burn tax on the token to decrease the LUNC supply, which experienced hyperinflation when the UST stablecoin fell below its $1 peg. This led to the system minting LUNC (known as LUNA then) as holders converted their UST holdings to LUNC using the system’s built-in mechanism. The token supply, which was approximately 343 million on May 4, inflated to over 6.5 trillion by May 14.
At present, the Terra Classic blockchain imposes a 0.2% tax on all LUNC token transactions, aimed at gradually reducing the LUNC token supply. Initially, this tax was set at 1.2%, but it excessively deterred on-chain activity, leading to a more than 90% drop in on-chain transaction volume. Consequently, the community approved a proposal to reduce the tax to 0.2%.
Despite the reduction, a 0.2% tax on all on-chain transactions could still pose a significant obstacle to the actual adoption of the Terra Classic blockchain. In simple terms, many other blockchains offer virtually the same functionality as Terra Classic without levying a tax on all transactions. Hence, it might be challenging for the Terra and Luna Classic ecosystem to become a significant player in decentralized finance, NFTs, and other use cases beyond speculative LUNC holding.
From a certain viewpoint, LUNC has already rebounded. The coin boasts a market capitalization of over $500 million, even though the chain’s DeFi ecosystem had a Total Value Locked (TVL) of only about $2.4 million as of 27 June 2023. The platform also appears to have relatively low adoption in terms of decentralized applications. Therefore, it’s difficult to claim that LUNC is currently undervalued.
When Will Luna Classic Reach $1? A Timeline Projection
Luna Classic (LUNC) has been a topic of intense discussion. For LUNC to reach the $1 mark, it would need to surge by a staggering 8000 times. This would result in a market capitalization of $5900 billion for Luna Classic, over twice the market cap of tech giant Apple. If LUNC were to grow at a steady rate of 25% per annum, it would take an estimated 39 years for it to reach $1. However, given the current state of Luna Classic, it’s crucial to delve deeper into these projections.
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Is an 8000 Times Increase Possible?
To put things into perspective, Bitcoin, the leading cryptocurrency, saw a 1400x increase over a decade, while Ethereum experienced a 166x rise in just six years. However, these growth rates occurred under unique conditions.
Luna Classic, on the other hand, operates in a market saturated with over 50 tokens, each boasting a market cap of a billion. Therefore, it’s highly unlikely that Luna Classic will witness an 8000-fold increase.
Let’s consider the numbers.
Luna Classic has a circulating supply of 5.98 trillion LUNC tokens. For each token to be worth $1, the LUNC market cap would need to match the supply, resulting in a colossal market cap of $5.98 trillion!
The entire crypto industry barely touched $3 trillion during the last bull market. Predictions for the crypto industry’s growth suggest a potential rise to $4.94 trillion by 2030. Even if Luna Classic were to become the largest token in the market (a highly unlikely scenario), it would not reach a $6 trillion market cap until around 2050.
Tax Burn’s Impact On LUNC Price
Let’s consider the Luna Classic burn strategy. In October, the Luna Classic burn tax was reduced from 1.2% to 0.2%. Consequently, the total LUNC burned in October amounted to 18.8 billion, while November saw a total burn of 9.2 billion LUNC.
At this pace, Luna Classic could potentially burn 1 trillion tokens over the next decade. However, even with this significant reduction in supply, LUNC would still require a $5 trillion market cap to reach a $1 price point.
Extrapolating further, Luna Classic could theoretically burn 5 trillion tokens over a 50-year period. This would sufficiently decrease the supply to allow LUNC to reach a $1 price without necessitating a market cap exceeding $1 trillion. While this presents a potential solution, it raises the question: are investors prepared to wait half a century?
Terra Luna Classic Price Prediction For 2023 & 2024: Will LUNA Classic Reach $1?
As of writing, the LUNC token price trades at $0.00009146, declining over 0.1% in the last 24 hours. LUNC price is currently consolidating near the crucial resistance level, building up momentum for an upcoming breakout near $0.0001.
However, the LUNC price is predicted to reach an average price $0.00015 and $0.0002 by the end of 2023 and 2024, respectively.
Hence, envisioning a situation where LUNC surpasses the overall performance of the cryptocurrency market appears challenging. The proactive community may be Luna Classic’s secret weapon, given that LUNC holders are fervently advocating for the coin on various social media outlets, including Twitter. Nevertheless, for Luna Classic to reclaim its previous success, it’s essential that the project also advances at a fundamental level.
LUNC’s peak market capitalization reached approximately $41 billion, a figure that the LUNC community would need to multiply its value by over 40 times to match. Although such a surge is not entirely out of the question, it is highly improbable, particularly within a short time frame. LUNC stands out as one of the most promising penny cryptocurrencies, even if it doesn’t reach the symbolic $1 mark.
If you’re contemplating whether Luna Classic will ever hit the $1 threshold, it’s crucial to temper your expectations. Given the current supply of LUNC, the prospect of it reaching $1 is virtually non-existent. Furthermore, it will require a considerable amount of time before the LUNC burn tax – a mechanism designed to reduce the supply of LUNC – begins to have a significant impact.
Therefore, while the Luna Classic community believes in the cryptocurrency’s potential, the likelihood of LUNC’s price reaching a $1 valuation remains extremely low. However, if you want to buy Luna Classic now, it is advised to do your own research and conduct investment advice.