LUNA is the coin from parent company Terraform Labs. It was made back in 2019, and has risen to prominence last year. However, in the past week, the coin price has exploded 64% higher. 15% of this move has come within the past 24 hours. This has pushed the LUNA price to $96.50, an all-time high as we write.
What does LUNA do?
LUNA is an interesting project from Terra, and holds fundamental value. The coin is used by Terra to support the volume and trading of stable coins. Stable coins are ones that are pegged in value to a fiat currency. A fiat currency is something like the US dollar, or British Pound.
Stable coins are a useful gateway for people to get access to crypto. By converting fiat funds into stable coins, the investor then has access to buying a host of smaller alt coins. Given the volatility in crypto, LUNA is used to balance out the supply and demand on the stable coins.
Why is LUNA flying?
In the past few weeks, upgrades have been initiated. These include Colombus-5, Wormhole v2, and an Inter-Blockchain Communication (IBC) protocol. All very technical things that we don’t need to understand in detail, but it does have some implications for the LUNA price.
Firstly, the projects are attracting capital inflows, ie purchase of LUNA. Secondly, some projects involve a burning mechanism. This isn’t new, and various coins use this to help deflate and manage supply. Ultimately, this is reducing supply in the market. The combination of the two points is helping to push the price higher.
Added to this is the huge wave of speculative buyers that are flooding the market. Whenever a coin starts to break out of ranges, moves can overshoot as people look to jump on the bandwagon.
Caution warranted ahead
This move might have legs to rally further in the next few days. However, we think the ship has sailed for the moment for new investors.
One point for caution as well is an SEC probe going on around Terra’s mirroring protocol. The commission are concerned that digital assets are intentionally mirroring US stock. It’s not the first time the SEC have probed a company, think back to the slog that Ripple went through and the impact it had on the price.
Therefore, even with a rebuttal from Terra’s CEO regarding the SEC probe, it could be something that weighs the coin down in coming months. Any resolution clearly would act as a boost.
Therefore, although we hate to say it, we do think that we’ve missed the boat on LUNA for the moment. However, given the value it has, we’d be keen to buy in should we see a pull back in coming weeks.