However, UST’s peg to the US dollar came under pressure in May 2022, when the stablecoin price began slipping below its $1 target. At its peak, LUNA had a market cap of $41 billion and UST had a market cap of just under $18.7 billion. The yields available in the Terra ecosystem drove huge demand.
At one point, users were earning an APY of about 20% on their UST deposits. The system worked well for a while, and the Terra platform started seeing explosive growth in 2021, primarily thanks to Anchor, a DeFi protocol that offered high yields on Terra stablecoin deposits. Conversely, 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. For example, if you held 10 UST, you could burn 10 UST to mint and receive $10 worth of LUNA. The platform had a built-in arbitrage mechanism that could be used to burn stablecoins to mint LUNA, or vice versa. Instead, Terra relied on an algorithmic design that involved the platform’s native token, LUNA. Terra’s stablecoins did not follow the classic reserve-based model, in which an equivalent amount of fiat currency or similar assets (such as treasuries) is held to back every token in circulation. For example, the UST stablecoin was pegged to the US dollar, the KRT stablecoin was pegged to the Korean won, and so forth. The platform revolved around algorithmic stablecoins pegged to various fiat currencies. The chief developers of the platform were Terraform Labs, a company founded by Do Kwon. The Terra blockchain platform was launched in April of 2019. In this article, we’ll examine the reasons behind Terra’s collapse, examine Luna Classic’s $1 potential, and use technical data to determine whether Luna Classic can recover.īefore we take a closer look at whether Luna is going to recover, let’s quickly recap the crash of the Terra ecosystem, which is why Terra Classic and Luna Classic exist in the first place. With the community-led effort, will Luna Classic reach $1 once again? Terra Classic is surprisingly popular and has one of the most active communities in the crypto world.
The legacy chain is still going on under the name Terra Classic, and the name of its token has been changed to LUNC. While Terra is down, it’s certainly not out-whether Luna Classic can recover will depend on the success of the burn program, support from the community, and the pace of protocol development. Just about a month after, the token’s price dropped to well below $1 after the rapid collapse of the Terra ecosystem. LUNA reached its all-time high on April 6, 2022, at a price of just under $120.
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