LUNA, a cryptocurrency associated with the Terra project, is surging this week. How can we explain these movements for a project that’s infamous?
Why is the Terra project (LUNA) making headlines?
If this surge is surprising, it’s because the Terra project seems to be well and truly dead. As a reminder, the ecosystem led by Do Kwon collapsed in May 2022. After massive liquidity outflows ($2 billion in a matter of hours), the Terra stablecoin lost its peg to the dollar.
The result: losses totaling $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. Terra’s collapse 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 exactly inspire confidence. But part of the Terra ecosystem has survived since 2022. A blockchain fork did indeed take place after the collapse, creating a “new” version of the protocol: Terra 2.0.
Terra’s cryptocurrency, LUNA, has surged in recent days
Yet it is indeed this Terra 2.0 that has continued to exist through thick and thin. And this week, the protocol launched an update: Terra Chain v2.18. This update aimed to fix several bugs and improve the network’s efficiency, which continues to be used only very marginally. This has therefore drawn attention to the cryptocurrency.
The other factor appears to be the trial of Do Kwon, the blockchain’s longtime leader. The former CEO of Terra is expected to hear his sentence today: his U.S. defense team is seeking a 5-year prison term, while prosecutors are seeking 12 years. He will then be tried in South Korea, his home country.
As a result of these two factors: the price of LUNA has risen 50% over the past 24 hours and 204% over the week. A surprising performance for a project that remains closely associated with one of the worst crashes in cryptocurrency history.
LUNA’s price surges this week
Enthusiasm that may be short-lived
However, caution is advised for those wishing to invest in 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—there is therefore no particular use for a stablecoin protocol without a stablecoin.
At this stage, Terra 2.0 offers no major features that justify its existence, having been originally designed to compensate victims of the protocol’s crash. Since its update and Do Kwon’s trial are temporary, it’s a safe bet that the enthusiasm won’t last.
Furthermore, it should be noted that this week’s strong performance does not match previous levels. LUNA had indeed reached $100 at its launch in 2022. This morning, it stands at just $0.22.
