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When looking for a good investment, it would ideally be in a rapidly growing economic sector. Terra (LUNA token) is a possible investment opportunity that meets that requirement. Terra is a programmable blockchain e-commerce platform for making cross-border payments. The e-commerce platform uses fiat pegged stablecoins to provide stability, low fees and instant settlement.
According to the 2021 McKinsey global payments report, global payments revenue is expected to increase to $2.5 trillion by 2025. Terra should be a huge success if it can capture even a fraction of that revenue.
What Is Terra (LUNA)?
Terra is a blockchain protocol that uses fiat pegged stablecoins to power global payments systems. Daniel Shin and Do Kwon founded Terra to help drive the rapid adoption of blockchain technology. The initial development on Terra began in January 2018, and the mainnet officially launched in April 2019.
Currently, Terra offers stablecoins pegged to the U.S. dollar, Mongolian tugrik, South Korean won and the International Monetary Fund’s Special Drawing Rights basket of currencies. Terra uses an algorithm to maintain a one-to-one peg, automatically adjusting the stablecoin supply based on demand.
Terra’s next-generation blockchain payments network seeks to increase efficiency for payment service providers and increase value for customers. To meet this goal, Terra has helped build an e-commerce alliance with 15 initial partners that accounts for $25 billion in gross merchandise value and a customer base that is 45 million strong.
Terra was built using Cosmos blockchain technology and is designed to disrupt traditional retail payment apps. It is disruptive because it’s an actual end-to-end payment solution versus the traditional fragmented payment infrastructure. Because of this, Terra could potentially save payment service providers hundreds of millions of dollars per year. Terra charges discounted transaction fees, charging only 0.5% to 2.0% compared to 2.5% to 3.0% charged by its competitors.
The native token of Terra is LUNA, which has a maximum supply of 1 billion tokens. New LUNA tokens are minted through the protocol’s algorithm, as needed, to maintain the price stability of Terra’s stablecoins. If the supply of LUNA ever exceeds 1 billion, tokens would be burned to bring the supply back to 1 billion. Terra’s ecosystem also includes an algorithmic stablecoin TerraUSD (UST).
Coins and tokens are usually listed with three different supply numbers. The maximum supply is the maximum number of tokens that will ever exist. In Terra’s case, it is also the threshold where exceeded tokens are burned to reduce the supply to 1 billion or less. The total supply number is the total number of tokens in existence right now, not counting tokens that have been burned. And finally, the circulating supply is the number of tokens that are circulating in the market and in the general public’s hands.
The Terra blockchain is secured using a Tendermint-based proof-of-stake consensus algorithm. LUNA token holders stake their tokens as collateral to validate transactions and receive rewards proportional to the amount of LUNA staked.
Terra launched a significant upgrade to its mainnet named Columbus-5 at the end of September. The upgrade adds deflationary pressure to LUNA by permanently burning tokens instead of transferring them to the community pool, as was done in the past. Also, all remaining LUNA tokens in the community pool will be permanently burned. The upgrade enabled higher scalability and greater cross-chain interoperability. Over 160 projects are slated to launch on Terra early next year.
LUNA Price History
Currently, LUNA is ranked #10 by market capitalization on CoinMarketCap, with a market cap of around $26 billion as of December 2021. LUNA has a circulating supply of 379,690,173 tokens out of a total supply of 852,716,451 and a 24-hour trading volume of $2,743,553,312.15.
LUNA has arguably one of the best-looking charts in the crypto space for 2021. The price of LUNA increased well over 13,000% from Jan.1, 2021, to December 4. The price increased from $0.62 to $85.80, a new all-time high.
After peaking in March at over $23, the price of LUNA slowly dropped over the next 2 months. On May 19, LUNA suffered a steep decline and bottomed on May 23, down over 80% from the March high. The price of LUNA consolidated in a sideways pattern over the next two months. On July 27, the price finally broke out of the consolidation pattern and gained over 300% over the next 30 days. Then after suffering a mid-November correction of around 34%, the price shot up to a new all-time high on December 4. What’s most impressive is that it happened as Bitcoin and the rest of the crypto market were selling off.
Terra (LUNA) Competition
Major competitors to Terra-LUNA would include competition from other global payment platforms such as Celer, Stellar and XRP. Let's take a quick look at the fundamentals of each competitor to see how they compare to LUNA.
As of December 2021, Stellar has a market cap of about $6.5 billion with a circulating supply of 24,628,345,926 XLM coins out of a maximum supply of 50,001,806,812 XLM coins, which means that 49% of the maximum supply is now in circulation. As of writing, Stellar is the 25th largest cryptocurrency by market capitalization.
Celer has a market cap around $300 million with a circulating supply of 6,076,711,958 CELR coins and a max supply of 10,000,000,000 CELR coins, which means that 61% of the maximum supply is now in circulation. With just one-twentieth the market cap, Celer is a far smaller project than XLM.
XRP has a market cap around $40 billion with a circulating supply of 47,247,295,769 XRP coins and a maximum supply of 100,000,000,000 XRP coins, which means that 47% of the maximum supply is now in circulation. XRP in the top 10 on CoinMarketCap by market capitalization.
Terra-LUNA has a market cap of just under $25 billion with a circulating supply of 378,397,292 LUNA tokens out of a maximum supply of 1,000,000,000 LUNA tokens, which means that 38% of the maximum supply is now in circulation. LUNA is ranked #10 on CoinMarketCap by market capitalization.
As you can see, Terra has the lowest percentage of LUNA tokens in circulation, but Terra has other advantages that could make it a better investment. Being a large player in the layer 1 blockchain space, the Terra ecosystem is rapidly expanding, increasing the utility of LUNA tokens. Also, Terra’s unique dual token system and use of stablecoins to make cross-border transactions protect users from exposure to severe coin or token price fluctuations.
Something To Consider:
Terra is currently involved in a legal battle with the U.S. Securities and Exchange Commission (SEC). In September, Terra was issued an investigative subpoena by the SEC. The SEC is accusing Terra of breaching securities laws and failing to comply with a previously issued subpoena.
How To Buy LUNA
If what you have read so far has you interested in investing in Terra, you can buy LUNA on Gemini and Voyager. LUNA tokens are also available on many other exchanges. If you don’t want to use one of the three listed, check out these markets from CoinMarketCap.
No matter what exchange you choose, you need to open an account if you don't already have one. The process to open an account is pretty much the same for most exchanges. You will most likely need some form of ID to complete the ID verification. This process can vary depending on your country, but most major exchanges will require you to verify your identity.
Once you have opened your account, the next step is to link a bank account so that you can transfer in fiat (USD, euros, etc.) to make your purchase. Some exchanges also allow you to make purchases with credit or debit cards.
Now that you have LUNA tokens in your account, you need somewhere to store them. You can leave them on the exchange but be aware that you are exposed to possible loss of your tokens if the exchange or your account is hacked.
Best Hardware Wallet For LUNA
If you decide not to leave your LUNA on an exchange and want the highest level of security, you will want to store your tokens in a hardware wallet. Hardware wallets are also known as cold storage wallets because of their ability to be isolated from the internet when not in use. This feature, in combination with the Secure Element chip used in the Ledger Wallet, makes them very secure.
- ERC-20 tokens
Best Hardware Wallet: Ledger
Not too many hardware wallets support LUNA, but you can use the Ledger Nano S or Nano X. To store LUNA on either, you need to install the Ledger Live application and download Terra Station on your hardware wallet. Terra Station is a wallet application for holding Terra assets and interacting with the Terra blockchain.
You can purchase either wallet directly from Ledger or Amazon. The Nano S costs $59, and the Nano X costs $119.
Bonus:
How Bitcoin performs will probably have a significant impact on the price of LUNA. Also, watch the ongoing legal battle between the SEC and Terra because the result could also affect prices.
Cryptocurrency Market Outlook
Since setting a new all-time high, Bitcoin has been in a downtrend over the last month. As a result, much of the rest of the crypto market has followed suit. The exception to this trend has been LUNA, which just set a new all-time high on December 4. Moving forward, watch Bitcoin for clues to where the rest of the crypto market may be going.
Is LUNA a Good Investment?
The successful launch of the Columbus-5 upgrade will lead to further expansion of the Terra ecosystem with at least 160 new projects launching on Terra in early 2022. These actions should increase the use case for LUNA tokens and positively affect the price.
However, keep in mind that Terra is involved in an ongoing legal battle with the SEC that could negatively impact the price. That being the case, it still appears that the positives outweigh the negatives making LUNA tokens a good investment.
About Donald Hancock
Donald’s expertise lies in the technical analysis of both stocks and crypto.