Terra Luna Price Prediction: The Project Built On Shaky Ground? (2024)

Terra Luna is a blockchain project that made waves during the bull market of 2021 before catastrophically collapsing in 2022. Erasing over $US40 billion from the market, Terra Luna caused extreme distress to the crypto ecosystem and is partially to blame for the carnage in the industry experienced in 2022.

Initially, the Terra protocol was designed as an innovative force in the stablecoin domain, centred around two primary cryptocurrencies: UST and LUNA. While UST was pegged to the USD, LUNA acted as the governance token of the ecosystem. What set UST apart from other stablecoins was its backing. Instead of relying on banks holding equivalent USD, UST gained backing from LUNA. This unconventional approach, which essentially backed a stablecoin with a volatile asset, was viewed with scepticism.

The year 2022 proved catastrophic for Terra. As the broader crypto market grappled with challenges, LUNA’s price began its downward journey. This decrease triggered a domino effect, devastating the values of both UST and LUNA, pushing them near zero and initiating a widespread liquidation event. Numerous investment funds, crypto exchanges, and projects went bankrupt.

The Terra community opted for a fresh start to address the crisis, which consisted of a new Terra chain (LUNA 2.0), while the original became LUNA Classic (LUNC).

“The Terra chain was rechristened as Terra Classic, with LUNA undergoing a similar transformation,” Willemsen notes.

“Post its launch in May 2022, LUNA experienced wild price fluctuations, finding brief stability near $US3. However, as we speak today (March 27, 2024), it’s trading at $US1.21.”

Predicting the trajectory of a cryptocurrency is as much about understanding its inherent strengths and weaknesses as it is about gauging the broader market forces at play. As we enter the second quarter of 2024, there is little anticipation for Terra Luna (LUNA) to return to its former glory.

“I find it extremely difficult to mount a bullish case for LUNA over the medium to long term,” Willemsen noted. According to Willemsen, the optimism for a bright future for LUNA is contingent on external market dynamics. “The only way I can see it performing well against USD or AUD is if the broader crypto market enters a sustained bull market.”

The token has risen from an all-time low of $US0.40 to $US1.21, a 200% gain, since October last year as the crypto markets have shown strength. While this may seem remarkable, most projects have marked similar or greater gains. Even Bitcoin, the largest crypto asset, has posted an almost 200% gain over the same period.

However, even in a rosy-market scenario, Willemsen expresses reservations. He notes that while broader market gains might temporarily boost LUNA, its inherent competitive standing might not promise lasting superiority.

“But even then, in this scenario, I seriously doubt LUNA can outperform its main competitors—those being any blockchain that is optimised for smart contracts, such as Ethereum’s ETH and Solana’s SOL—over the duration of the next bull cycle,” he says.

While market surges may elevate a wide range of tokens, inherent strengths and robustness play a pivotal role in determining which cryptocurrencies can maintain their momentum—and which might falter.

The future trajectory of any cryptocurrency is a combination of both internal dynamics and broader market trends. We’ve sought insights from Willemsen to shed light on the potential bullish and bearish paths for LUNA.

The Bull Case

A lot would need to change for LUNA to have a solid bullish case. Not only would it need to catch up with competitors, but it would also need to shake the distrust it has developed from investors and projects due to its past.

The token has risen from an all-time low of $US0.40 to $US1.21, a 200% gain, since October last year as the crypto markets have shown strength. While this may seem remarkable, most projects have marked similar or greater gains. Even Bitcoin, the largest crypto asset, has posted an almost 200% gain over the same period.

Willemsen says that LUNA could increase in value “if the broader crypto market enters a sustained bull run”. In such an environment, he believes that LUNA, like many altcoins, stands to benefit from the cyclical nature of crypto markets.

“LUNA may benefit from crypto investors rotating profits into riskier altcoins,” he says. If past trends are reliable indicators, such a shift could manifest “after BTC, ETH, and major altcoins have trended higher for several months”.

This is already beginning to play out, with Bitcoin recently breaking all-time highs following the approval of 11 spot Bitcoin exchange-traded funds (ETFs) for trade in the US and dragging many lifeless altcoins, like LUNA, along with it.

Although there is no strong bull case for the project, anything could happen in crypto.

The Bear Case

The bear case for LUNA in its current state is much stronger. Willemsen says the recent advancements of Ethereum, which has traditionally faced scalability issues, is a challenge for LUNA.

“In recent years, alternative layer-one (L1) blockchains, such as Terra, benefited from Ethereum’s inability to handle significant user demand without fees surging to unsustainable levels,” he says.

But Ethereum’s landscape is evolving. “Since then, Ethereum has become somewhat more scalable through the proliferation of layer-two (L2) solutions known as rollups,” he adds.

Recently, Ethereum implemented the Dencun upgrade, which substantially reduced the fees for L2 chains like Optimism, Arbitrum and Base chain. Users on these chains now benefit from transaction fees of less than a cent while interacting with a blockchain leveraging the security of the main Ethereum chain.

If Ethereum continues on this path to better scalability and cheaper fees for users, it could diminish the unique value proposition of chains like Terra.

Further strengthening the bearish case, Willemsen points to the vibrant ecosystems of other alternative L1 blockchains, including the formidable contenders Solana, Polkadot, and Avalanche.

“While Terra’s user and developer ecosystem is vibrant relative to the original chain, it still has its work cut out for it when compared to other alternative L1 blockchains,” he says.

With these insights, it’s clear that while Terra Luna has potential avenues for growth, it faces formidable challenges.

The ultimate question for any potential investor is whether a particular asset represents a wise allocation of resources. Terra Luna’s colourful history and the crypto market’s inherent unpredictability, demand a high degree of research and risk on the part of investors.

“If the crypto market enters a sustained bull market, LUNA may perform well against USD and AUD,” Willemsen says.

This acknowledges the power of a rising tide in the crypto world, which can lift various tokens, including LUNA. However, Willemsen adds: “Longer term, LUNA faces immense challenges to compete against the cryptocurrencies native to those various blockchains that currently bolster user and developer ecosystems that are far more vibrant than Terra’s.”

Willemsen’s arguments underscores an important consideration: the relative strength of a cryptocurrency is not just about its individual merits but also how it stacks up against competitors. While Terra Luna might benefit from short-term market trends, its standing, in the long run, will likely be determined by its ability to foster a thriving ecosystem and offer unique value propositions in the face of stiff competition.

This article is not an endorsem*nt of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency or CFDs as an investment class. Cryptocurrency is unregulated in Australia and your capital is at risk. Trading in contracts for difference (CFDs) is riskier than conventional share trading, not suitable for the majority of investors, and includes the potential for partial or total loss of capital. You should always consider whether you can afford to lose your money before deciding to trade in CFDs or cryptocurrency, and seek advice from an authorised financial advisor.