LUNA vs. LUNC: Which is the worse investment?

Luna was launched in 2018 and was originally developed as Terra’s first native token. They called it LUNA.

It is intended to serve as a complementary token that absorbs any price fluctuations of the cryptocurrency’s smart contract-based stablecoin, terraUSD (UST). UST will maintain its peg to the U.S. dollar by creating and destroying UST tokens through an algorithm designed to maintain its peg at a 1:1 ratio.

The token was valued at $119.55 on April 5, 2022, and fell almost 100% to below $0.0006 by May 13, 2022.

Not only did investors lose billions of dollars, but the implosion set off a chain reaction that brought down numerous high-profile cryptocurrencies. Just when it looked like the dust had settled, Luna reappeared, and in the first week of September 2022, it surged by a staggering 400%.

Today, there are two cryptocurrencies in existence - Luna and Luna Classic. The old Luna was renamed Luna Classic and trades under the ticker LUNC.

After the new version of Luna was born, Terra Classic with LUNC has been in the news for its meteoric rise. Two major headlines that contributed to its massive price increase include:

• The Terra community voted to implement a 1.2% tax coin burn on every transaction. In other words, a 1.2% burn will be implemented on every transaction. When tokens are burned, they are no longer in circulation, reducing supply while increasing demand - now it will be easier to trade tokens thanks to major exchanges like Binance adding LUNC/USDT trading pairs, and this new exchange's support for the upcoming tax coin burn.

However, these two headlines and the current price increase do not mean that LUNC is a solid investment, nor do they mean that the price action is sustainable.

If you look closely at the indicators and charts, the price surge of LUNC is artificial.

The chart below does not show a steady increase in market value, but rather a huge spike in market value within a week. In fact, on August 28, 2022, LUNC had a market value of $223 million, and on September 10, 2022, its market value rose to over $1 billion due to two headlines.

Luna Classic (LUNC) Market Cap

Interestingly, only about 1,000 new traders/investors participated in the price surge. This is a sign of the lack of trust that people still have in LUNC. On August 28, 2022, there were 10,619 LUNC holders, which grew to 11,691 on September 10, 2022. According to the chart below, there were only 1,072 more unique wallet addresses holding LUNC between these dates.

Total Addresses - CoinMarketCap

Furthermore, the total trading volume spiked to 4.5 billion in the 24 hours on September 9, 2022, with only a small number of investors involved. This is likely an organized pump scheme, as only a small number of people participated over the course of a week.

The graph shows the volume surge on September 9, 2022, the largest since LUNC’s inception.

Terra Classic (LUNC) - Token Price

What’s more, the South Korean government recently issued an arrest warrant for Do Kwon.

All in all, the lack of use cases for LUNC, the collapse of LUNA in May 2022, and Do Kwon’s arrest warrant do not support a price surge for LUNC. In addition, it is seen that a very small number of investors benefited from the price pump.

What is LUNA?

On May 28, 2022, the new Terra blockchain was officially launched. Starting on the same day, many UST and LUNC holders received their LUNA tokens as part of the first round of token distribution known as airdrops. When trading began, the price fluctuated wildly, thanks to the support of well-known cryptocurrency exchanges, while traders speculated on what value this coin could bring.

Although LUNA and LUNC are part of the Terra ecosystem, there are differences and similarities in the price action of the two tokens. If you look at the weekly chart of LUNA, the blue box represents the price range of the new LUNA token. It can be seen that the old version of LUNA has more standard price action compared to the new LUNA.

Source: TradingView

However, the first week of September was a special day for LUNA as it also surged by more than 333% like its brother token LUNC. On September 5, 2022, it was trading at $1.77 and skyrocketed by more than $7.60 on September 9, 2022. From a bigger perspective, the entire cryptocurrency market is still a bear market, yet LUNA bucked the bearish trend in a matter of days.

Despite the LUNA collapse in May 2022, can we say that this project and Terraform Labs have fully gained the trust of the cryptocurrency community?

One telling statistic is contained within social media. Since LUNA’s inception in May 2022, LUNA’s Reddit subscribers have only grown to 682 people. Additionally, LUNA has only 9,861 Telegram members. The low growth of new social media members signals low sentiment within the cryptocurrency community.

The same theme of low demand and price surges as the LUNC market has attracted attention. From a fundamental perspective, 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.

The negative press has outweighed the positive press, proving that LUNA is a risky investment.

This article comes from the Footprint Analytics community contribution. Footprint Community is a global mutual data community where members use visualized data to create insights that spread. In the Footprint community, you can get help, build connections, and exchange blockchain-related learning and research on Web 3, Metaverse, GameFi and DeFi. Many active, diverse, and highly engaged members inspire and support each other through the community, and a global user base is established to contribute data, share insights, and drive community development.