Luna Classic (LNC): a speculative asset and “meme” currency

Luna Classic (LUC) tokens from the old Terra blockchain – now known as Terra Classic – continue to circulate and remain available on many exchanges. But with the algorithmic stablecoin terraUSD (UST) trading well below its parity against the dollar, and the ecosystem migrating to the new Terra blockchain, does LUNC still have any use?

Source: Adobe/ChaosMaker

The question arises because, in recent days, old and new Luna tokens are available for trading on many exchanges. So far, however, traders have mostly questioned the usefulness of the new Luna token, suggesting that it has little value and few real use cases.

Darren Laufounder of the newsletter Daily Ape and former crypto investment firm analyst Spartan Grouphas in particular asked the following question on Twitter last week: “What is the value proposition of LUNA without the UST?”.

Others question the true intentions behind the launch of the new token.

“The only reason to buy LUNA 2.0 is to qualify for the next LUNA 3.0 airdrop after it goes zero like LUNA 1.0,” said writing Luke Martintrader and host of Podcast Stacks, on Twitter earlier this week. Others seem to share the same opinion: a user affirms that so far no one has been “able to explain what the use cases for LUNA are.”

Luna Classic price:

1654296282 920 Luna Classic LNC a speculative asset and meme currency
Source: CoinGecko

Highly speculative assets

Commenting on the subject, Ben Caselinhead of research and strategy at the crypto exchange AAXtold that he did not consider LUNC to be different from the new token: both are of little value to ordinary users. These two tokens have been reduced to “highly speculative assets” with “a tokenomics and questionable usefulness,” Caselin said.

He explained that the best framework to use when trying to understand the value of the two Luna tokens is to compare them “to the same logic that drives meme currencies.”

Separately, AAX’s head of research said the old Terra chain is unlikely to follow a similar progression to Ethereum Classic (ETC) – a blockchain that continues to survive with a community of its own.

“Although sharing a similar designation, Luna Classic has nothing to do with Ethereum Classic. The latter has continued to exist and see trading volume, primarily due to a core of principled traders who were initially in disagreement with the Ethereum hard fork, following the DAO hack,” Caselin said.

He added that LUNC is “not a principled token,” but rather “a vehicle for speculation.” And due to the current low trading volumes, it is also vulnerable to manipulation, Caselin warned.

“Over the coming weeks and months we will see if either will continue to grow in popularity and if the market will even out or not.” Attracting new investors while Luna Classic investors end up with permanent losses is not a recovery,” the researcher stressed.

Terra Classic Price Exploitation

Malicious actors have previously attempted to manipulate the legacy Terra blockchain, exploiting an error in a pricing oracle for Terra Classic to drain funds of multiple synthetic asset pools on the DeFi Mirror Protocol platform.

“The hack will get worse when markets open tomorrow unless the dev team steps in and fixes the price oracle,” it said. writing FatMan, a pseudonymous Terra researcher, about this incident last weekend.

Fortunately, Mirror Protocol seems to have been able to limit the damage by disabling the use of several synthetic assets as collateral on the platform. “The crisis has been averted,” said declared FatMan to his 61,000 Twitter followers about 12 hours after he sounded the alarm.

Extreme volatility remains

Caselin’s view that Luna Classic is now a highly speculative asset seems accurate given the price chart of the past few days.

On the exchange OKX, where LUNC has been available since May 29, the token has been subject to extreme volatility. From an opening price of $0.00008, LUNC’s price more than doubled over the next two days, before crashing again on day three.

The token is currently trading around $0.00010, which is 20% higher than when it opened on May 29.

In the absence of a better explanation, it appears that Luna Classic’s unclear fundamental value is to blame for the token’s extreme volatility.

Therefore, the comparison with a meme currency makes sense. And following this logic, traders and investors would do well to view their bets on the token as games of chance rather than traditional investments based on underlying values.

Meanwhile, the new LUNA token has fallen 64% in the five days since its launch.

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Luna Classic (LNC): a speculative asset and “meme” currency

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