LUNA vs. LUNC: Which is the worse investment? - Footprint Analytics

Sept. 2022, Mike Antolin

Launched in 2018, Luna was initially developed to be the first of Terra’s native tokens. They called it LUNA.

Its purpose was to serve as a complementary token to absorb any price fluctuations of the cryptocurrency’s smart contract-based stablecoin, terraUSD (UST). UST would maintain its peg with the US dollar by creating and destroying UST tokens through an algorithm, which has been designed around to maintain its peg at a 1:1 ratio.

The token was worth $119.55 on April 5, 2022 to fall almost 100% to below $0.0006 on May 13, 2022.

Not only did investors lose billions of dollars, but the implosion also triggered a chain reaction that brought down numerous high-profile cryptocurrencies. Just when it appeared that the dust had settled, Luna resurfaced with a stunning 400% increase during the first week of September 2022.

Nowadays, two cryptocurrencies exist–Luna and Luna Classic. The old Luna, renamed Luna Classic, is traded under the ticker LUNC.

After the creation of the new version of Luna, Terra Classic with LUNC has been in the news due to its meteoric rise. The two major headlines which contributed to the massive rising of its price include:

Terra community votes on a 1.2% tax coin burn for each transaction. In other words, a burn of 1.2% will be implemented for each transaction. When coins are burned, they’re no longer circulating, decreasing supply while increasing demand — leading to higher prices for those that remain.
Trading tokens will now be easier thanks to the addition of LUNC/USDT trading pairs on major exchanges such as Binance, as well as this new exchange’s support of the upcoming tax coin burns.

However, these two headlines and the current price pump do not imply that LUNC is a stable investment, nor does it imply that the price action is sustainable.

If you study the metrics and charts carefully, the LUNC’s price surge is artificial.

The chart below does not show steady growth in the market cap but rather a massive spike in market capitalization within one week. In fact, the market cap of LUNC on August 28, 2022, was at $223 million, which went north of $1 billion on September 10, 2022, due to the two headlines.

Luna Classic (LUNC) Market Cap

Interestingly, only about 1000 new traders/investors participated in the price surge. This signifies that there is still a lack of trust in LUNC. On August 28, 2022, there were 10,619 holders of LUNC, which grew to 11,691 on September 10, 2022. Between those dates, there were only 1072 more unique wallet addresses holding LUNC, according to the chart below.

Total Addresses — CoinMarketCap

Additionally, the total trading volume skyrocketed to 4.5 billion within 24 hours on September 9, 2022, knowing a small handful of investors had been involved. There is a high probability this may have been an organized pump scheme as only a tiny group participated during a one-week span.

The chart shows the trading volume spike for September 9, 2022 which was the largest since LUNC’s inception.

Terra Classic (LUNC) — Token Price

More importantly, the South Korean government has recently issued an arrest warrant for Do Kwon.

All and all, the lack of a use case for LUNC, the collapse of LUNA in May 2022, and the arrest warrant of Do Kwon do not support the price surge of LUNC. Additionally, it is seen that a tiny group of investors benefited from the price pump.

What is LUNA?

On May 28, 2022, the new Terra blockchain was officially launched. From the same day onwards, many UST and LUNC holders received their LUNA tokens as part of the first round of token distribution called an airdrop. Due to the support from big-name cryptocurrency exchanges, trading started with wild price swings while traders speculated on what value this coin might bring.

Though LUNA and LUNC are part of the Terra ecosystem, the price action of the tokens has differences and similarities. If you look at the weekly chart of LUNA, the blue box represents the price range of the new LUNA token. It is visible that the older version of LUNA had more of a standard price action compared to the new LUNA.

Source: TradingView

However, the first week of September marked a special day for LUNA as it also surged over 333% just like its brother token LUNC. On September 5, 2022, it was trading at $1.77, skyrocketing past $7.60 on September 9, 2022. From a larger perspective, the overall crypto market was still a bear market, yet LUNA went against the bearish trend for a few days.

Despite the crash of LUNA in May 2022, can we say that this project and Terraform Labs have fully gained the crypto communities’ trust?

One glaring statistic is contained in social media. LUNA’s Reddit subscribers have only grown to 682 since LUNA’s inception in May 2022. Additionally, LUNA has only 9,861 Telegram members. The low growth for new social media members signifies low sentiment within the crypto community.

The same theme of low demand and a price surge like with LUNC market raises flags. From a fundamental point of view, there are no innovative use cases for this token. The media has also paid close attention to Do Kwon, most of which has been negative.

Negative news has outweighed positive news which proves LUNA to be a risky investment.

This piece is contributed by Footprint Analytics community.

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