LUNA, a cryptocurrency associated with the Terra project, is surging this week. How can these movements be explained for such an infamous project?
Why is the Terra (LUNA) project making headlines?
This rise is surprising because the Terra project seems to be well and truly dead and buried. As a reminder, the ecosystem led by Do Kwon collapsed in May 2022. After massive liquidity leaks ($2 billion in a few hours), the US-based stablecoin lost its peg to the dollar.
The result: losses amounting to $40 billion, a CEO on the run who was eventually caught by the law, and a trial that has just begun in the United States. The fall of Terra was one of the most catastrophic events in the ecosystem, revealing the limitations of the algorithmic stablecoin models that were in vogue at the time.
This history does not particularly inspire confidence. But part of the Terra ecosystem has survived since 2022. A blockchain split took place after the collapse to create a “new” version of the protocol: Terra 2.0.
Terra’s cryptocurrency, LUNA, has been surging in recent days
However, it is Terra 2.0 that continues to exist year in, year out. And this week, the protocol launched an update: Terra Chain v2.18. This update was intended to fix several bugs and improve the efficiency of the network, which continues to be used very marginally. This has therefore drawn attention to the cryptocurrency.
The other factor seems to be the trial of Do Kwon, the blockchain’s long-time leader. The former CEO of Terra is expected to learn his sentence today: his American defense team is asking for five years in prison, while prosecutors are seeking 12 years. He will then be tried in South Korea, his native country.
As a result of these two factors, the price of LUNA has risen 50% over the last 24 hours and 204% over the week. This is a surprising performance for a project that remains closely associated with one of the worst crashes in the history of cryptocurrencies.
Enthusiasm that could be short-lived
However, caution is advised for those who would like to take a position on this strange remnant of a project. It should be noted that while a version of LUNA still exists, UST has not been included in this new version of the protocol—therefore, there is no particular use for a stablecoin protocol without a stablecoin.
At this stage, Terra 2.0 does not offer any major features that justify its existence, having been originally designed to compensate the victims of the protocol crash. With its update and Do Kwon’s trial being temporary, it is likely that the enthusiasm will not last.
Furthermore, it should be noted that this week’s strong performance does not match previous weeks. LUNA had reached $100 when it launched in 2022. This morning, it is trading at just $0.22.
