Perhaps the largest cryptocurrency crash occurred in May 2022, when the Terra-LUNA digital asset ecosystem collapsed. It was worth an estimated $40 billion.
In the span of a week, the value of the largest algorithmic stablecoin in the world, UST, and the native token of Terra designed to sustain UST’s value, LUNA, both plummeted to near zero. Before the crash, LUNA and UST were the leading cryptos.
Investors everywhere went into a state of fear and lost everything as the market crashed. The developers of the Terra Network were hit hard as well. What inspired the LUNA Classic?
Why did LUNC’s Price Skyrocket over 250%?
So far in September, Terra Classic (LUNC) has grown by about 100% and has been the best-performing cryptocurrency.
Over the course of the last month, the token’s value has increased by more than 250%, reaching a record high of $0.000594 on September 8th. However, Ethereum (ETH) only gained 3.5%, while Bitcoin (BTC) fell 4% within the same time frame.
On Aug. 27, a new staking service went online on the Terra Classic chain, driving the LUNC price high.
Over 610 billion LUNC have been staked using Terra Classic, compared to a total supply of 6.9T units, as reported by LuncStaking Bot. That’s right, approximately nine percent of all LUNC has been pulled out of circulation.
Based on information from StakingRewards, staking Terra Classic returns 37.8% per year. This makes it one of the best-paying cryptocurrencies.
After the staking service was added, the price of a LUNC token went up by more than 450%. This suggests that the higher returns may have been a reason for the price increase.
In addition to staking, the developers of Terra Classic added the ability to burn tokens to make LUNC even more scarce.
At the start of September, Edward Kim, a member of the Terra Classic community, suggested a 1.2% transaction fee on LUNC on-chain transactions. The money from this kind of tax would be sent to an invalid address, which would take that money out of circulation.
Interestingly, 3.8 billion LUNC tokens have apparently been burned using the LUNC Burner system.
Also read: What to expect from LUNC tax burn
The Genesis of LUNC
LUNC is Terra Classic’s native token. The terraUSD stablecoin was built on the same blockchain—previously known as Terra (LUNA)—that was developed in 2019 by crypto enthusiasts Do Kwon and Daniel Shin. LUNA was burned to make UST, which could also be traded for LUNA.
The price of LUNA dropped from almost $64 to $0.0087 between May 9 and May 12, a drop of 99.98%. UST dropped as well, and action was required since the fall was causing chaos in the cryptocurrency market.
The Luna Foundation Guard announced a hard fork with the new blockchain named Terra and a new LUNA token (LUNA2).
However, these proposals were quickly reversed, and it was stated that a new blockchain would be created. It was also said that the blockchain’s first version would be called Terra Classic. On the other hand, UST would be renamed USTC and modified to shift from an algorithmically backed stablecoin to a collateral-backed one.
Since the creation of the first block on the new Terra blockchain on May 28th, LUNA has evolved into LUNC, a community-driven cryptocurrency.
Luna classic (LUNC) and Luna (LUNA) are both high-risk investments. It’s like buying a burnt-down house or paying for paper designs.
There isn’t much reason to use or build a project on top of the Terra blockchain or the LUNC and UST coins that go with it.
Problems will arise for the new blockchain if only a fraction of the many protocols and development teams that were working on old Terra decide to trust it and continue working on applications.
Luna’s value and success will be determined by the blockchain’s activity and its use cases.