Bloomberg — Since the backers of the failed Terra blockchain launched a new digital token to compensate investors burned by one of crypto’s biggest busts, the blows have kept coming.
Luna 2.0, as the coin is known, emerged out of the ashes of crypto entrepreneur Do Kwon’s ecosystem, which collapsed after the TerraUSD algorithmic stablecoin at the center of it dropped from its dollar peg in early May. But any hopes of a quick recovery for investors who lost billions of dollars in the crash are fading, with the token losing more than half of its value in the past week alone, based on data from CoinGecko.
Scrutiny from securities regulators in the US and police in South Korea is adding to the woes. The US Securities and Exchange Commission is investigating whether the marketing of TerraUSD violated federal investor-protection regulations, Bloomberg News reported Thursday. In Seoul, police are examining allegations that staff of Luna backer Terraform Labs embezzled Bitcoin holdings amassed to help defend TerraUSD’s peg to the dollar.
Four market watchers asked about their views on Luna 2.0 expressed skepticism about the coin’s prospects, and that of the new blockchain it runs on. Here’s what they had to say:
Mati Greenspan, founder of Quantum Economics: “Luna 2 was never meant to survive, it was simply a mechanism for some who were heavily invested to recoup some of their losses at the expense of new money coming in from the hype. I don’t see any reason for the price to go up ever.”
Kunal Goel, research analyst at Messari: “Terra 2.0 suffers from multiple problems. It has gone live in an unfavorable macro and crypto environment. Without an algorithmic stablecoin, it has no clear point of differentiation from other smart contract platforms. Finally, the regulatory overhang is a key concern in investors’ minds.”
Riyad Carey, research analyst at Kaiko: “Luna 2 will have a difficult time distinguishing itself in a crowded L1 ecosystem with large players like Avalanche and Solana and of course Ethereum. While the original Terra had a fairly robust ecosystem, much of that activity was centered around UST and aUST (UST earning yield in Anchor). Additionally, some of the price action was based around the burning of LUNA to create UST. So now Luna 2 doesn’t have this mechanism, will be facing inflation in the form of vesting/unlocks, and obviously has the baggage of being tied to the largest ever crypto collapse. So it will definitely be a tough path forward.”
Khaleelulla Baig, founder and CEO of KoinBasket: “Everyone wants to exit the new Luna as the founder Do Kwon has lost credibility among the community. Luna has no future. The founder didn’t build firewalls around the algo even when they had an opportunity to do so. That’s why they have lost credibility. Building the new Luna within the existing community will not make any sense now. Smart money will move to fundamental coins from such risky coins.”