Is it a good time to buy Terra’s LUNA before a possible hard fork?

  • Terraform Labs’ “Terra Ecosystem Revival Plan 2” met with a bearish response, LUNA price plunged 18.9%. 
  • The hard fork proposed by Do Kwon would create two versions of the token, LUNA Classic and LUNA Core – the original one. 
  • LUNC holders will receive LUNA tokens, in a fork inspired by Ethereum’s 2016 DAO hack.
  • Leading crypto analysts divided on Terra’s LUNA recovery prospects. 

Terraform Labs’ move to revive native token LUNA without stablecoin UST is similar to Ethereum’s hard fork of 2016. The algorithmic stablecoin UST will cease to exist once the revival plan is implemented since Terraform Labs CEO Do Kwon believes LUNA is more than TerraUSD. 

Also read: Can Ethereum price hold as Vitalik Buterin sells 30,000 ETH?

Terra’s LUNA could recover from crash with proposed hard fork

In an attempt to promote LUNA’s recovery and to compensate token holders, the co-creator of Terra, Do Kwon, put forward “Terra Ecosystem Revival Plan 2.” Still, LUNA continued to shed its value, with the 24-hour trading volume exceeding $2 billion. The Terraform Labs CEO explained the logic behind the new proposal to fork LUNA. The Terra ecosystem and its hundreds of developers, large number of holders and strong brand name will be preserved through the implementation of the proposal.  

Terra fork to set two parallel blockchains: LUNA Classic and LUNA Core

Do Kwon has recommended retaining both blockchains, the original being LUNA Classic (LUNC) and a parallel one being LUNA, based on snapshots taken from May 7, 2022. The total supply of the new LUNA Core chain would be capped at 1 billion tokens following the tokenomics detailed below:

  • 25% - Community pool, controlled by staked governance
  • 1% - Essential Developers emergency allocation. No lockup
  • 4% - Essential developers (1 year cliff, 4 year vesting thereafter, granted after launch traction)
  • 35% - All bonded / unbonded Luna, minus TFL at “Pre-attack” snapshot
    • For wallets with < 1M Luna: 1 year cliff, 2 year vesting thereafter
    • For wallets with > 1M Luna: 1 year cliff, 4 year vesting thereafter
  • 10% - Luna holders (staking derivatives included) at the “Launch” snapshot - 10% unlocked at genesis, 90% vested over 2 years thereafter
  • 25% - UST holders at the “Launch” snapshot - 10% unlocked at genesis, rest vested over 2 years thereafter

The revival plan does not have provisions for traders that sold LUNA during the crash, and holders that were locked out of their UST tokens (in exchange wallets) due to the exchange's decision to halt trading. Therefore, UST holders from exchanges like Coinbase have criticized Terra’s move. The fork could be a milestone event for LUNA and UST holders and aid the token’s recovery. The hard fork proposal will be voted in the Terra community on May 18, 2022.

Do Kwon said that “Terra is more than UST” and making it a completely community-owned chain through a fork is the best way forward for the project, its community of developers and token holders. 

Terra hard fork inspired on Ethereum’s DAO hack

Proponents have noted the likeness between Terra’s proposed fork and Ethereum’s hard fork of 2016, the famous DAO hack. Back then, Ethereum (ETH) was the forked blockchain, and Ethereum Classic (ETC) was the core blockchain. The Ethereum hard fork was a bailout to rescue the blockchain and its stakeholders from the negative impact of stolen funds, to the tune of $50 million. Since the hard fork, the Ethereum network has witnessed massive growth. Proponents believe the upcoming LUNA hard fork represents a bailout for the Terra ecosystem after the coordinated attack against its algorithmic stablecoin UST. 

Experts split on Terra’s LUNA price recovery potential

Glauber Contessoto, a crypto leading analyst, believes purchasing LUNA at this point is "a high-risk transaction" as the Luna Foundation Guard council has already utilized nearly $3 billion of its reserves trying to save UST and the new revival plan does away with TerraUSD entirely. 

@Hayess5178, another leading crypto analyst and developer, believes LUNA price could recoup some of its losses. LUNA price is attempting to break out, and a close above hourly resistance at $0.000207 could confirm an uptrend. 

Is it time to buy-the-dip on cryptocurrencies?

Terra's LUNA collapse brought the whole cryptocurrency market down, with Bitcoin price and all the altcoins suffering heavy losses. This might have presented a good buy-the-dip opportunity, is it time to go long on Bitcoin? 

South Korea launches “emergency” inspection after Terra's LUNA and UST collapse

South Korea's financial authorities have launched "emergency" inspections into domestic cryptocurrency exchange operators to enhance investors' protection after the recent collapse of the TerraUSD and Luna cryptocurrencies, sources said Tuesday. The move came after TerraUSD and LUNA's death spiral caused massive losses to investors and sending shockwaves across the world.

According to industry sources, the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have recently asked local cryptocurrency exchange operators to share information on transactions linked to TerraUSD and LUNA, including the volumes of their trading, their closing prices and the number of relevant investors. The top financial regulators have also asked them to provide their countermeasures to the recent market crash and analyses of what caused the collapse. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Join Telegram

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended content

Follow us on Telegram

Stay updated of all the news

Join Telegram

Recommended Content

Editors’ Picks

China coin narrative in play as Coinbase CEO warns of restrictive US crypto policies

China coin narrative in play as Coinbase CEO warns of restrictive US crypto policies

Brian Armstrong, CEO and co-founder of cryptocurrency platform Coinbase, shared his thoughts on restrictive US crypto policies in an opinion editorial published by Market Watch on Tuesday.

More Cryptocurrencies News

Ethereum holders pull $1 billion in ETH off exchanges hinting retail-led rally

Ethereum holders pull $1 billion in ETH off exchanges hinting retail-led rally

Ethereum holdings in exchange wallets declined by $1.04 billion between May 8 and May 31. Interestingly, while large wallet investors have shed their Ether holdings, the altcoin got redistributed to addresses with less than 1 ETH.

More Ethereum News

Dogecoin price action hints DOGE can reverse its bearish trend

Dogecoin price action hints DOGE can reverse its bearish trend

Dogecoin (DOGE) price presents a potential for trend reversal provided a certain set of conditions are met. These conditions involve overcoming key hurdles for DOGE bulls and seeing momentum indicators flip bullish on lower time frames.

More Dogecoin News

PEPE price to drop another 15% as altcoin winter is only halfway finished

PEPE price to drop another 15% as altcoin winter is only halfway finished

PEPE price is feeling the frost and cold of the altcoin winter that continues with some notable slides in price valuation in the altcoin space. After price action dropped below $0.0014700, traders must have understood that a turnaround would only occur at a high supportive level.

More PEPE News

Bitcoin: BTC delays inevitable crash to $25,000

Bitcoin: BTC delays inevitable crash to $25,000

Bitcoin price is delaying a crash that has been brewing for roughly two weeks. A failure to push higher could result in a steep correction next week. The troubling macroeconomic conditions could be key in catalyzing and trigger a nosedive for BTC holders.

Read full analysis