Is Terra Luna A Better Investment Than Cardano?

Terra has better prospects than Cardano, but it is best to hold both.

Last Updated February 14th 2022

5 Min Read

Cryptocurrencies are highly speculative and unpredictable investments. It is almost impossible to tell which one will outperform the other. For context, in 2020/21, no one would have imagined that meme coins with zero utility or adoption would do rounds on Bitcoin (BTC) and other top cryptos in gains. That is why it’s always best to spread your money across multiple high-potential cryptocurrencies.

In this case, rather than focus on which one is better between Cardano (ADA) and Terra (LUNA), it makes more sense to buy both. You never know where the winds will blow next.

However, if you want to maximize your money on one crypto asset, then Terra (LUNA) may be a better investment than Cardano. There are a couple of factors that support this assertion.

Terra Has Wider Adoption

Terra is a much newer blockchain than Cardano, yet it has more adoption. As of December 2021, the total value locked on Terra was only second to that of Ethereum. This makes Terra one of the biggest DeFi chains in the market today. The biggest use case to Terra is in the launch of algorithmic stable coins.

Algorithmic stable coins use an algorithm to determine demand and supply. When the demand increases, the number of coins is increased, and when it decreases, the excess supply is burned.

These stable coins are increasing in popularity because they are safer than conventional stable coins. That’s because they don’t rely on some third party always adding to the fat reserves in order to keep the ratio of a stable coin to fiat at 1:1.

To get an idea of how big of a deal this is, one needs to look at the controversies that surround Tether at the moment. There have always been concerns about whether Tether is backed 1:1 by actual dollars. Since 2021, US authorities have been taking an even closer look at this issue. If it ever emerges that Tether USDT is not backed 1:1 by the dollar, the following legal issues could be catastrophic to USDT holders and the entire crypto market.

This risk has led to an upsurge in demand for algorithmic stable coins such as UST. You are probably wondering, how does the increase in popularity of algorithmic stable coins make Terra (LUNA) a good investment?

Well, the whole system is set up so that it requires LUNA tokens for it to function. When the demand for stable coins such as TerraUSD, and TerraGBP increases, Terra issues new LUNA tokens to collateralize the additional stable coins that are minted. On the other hand, if demand for stable coins decreases, Terra burns LUNA with the drop in stable coin demand. Essentially, the more the demand for stablecoins grows, the higher the value of LUNA goes.

With the cryptocurrency market on a growth path, especially DeFi, the demand for algorithmic stable coins will only increase. This is evident in LUNA’s price action in the 2021 cryptocurrency bull rally. From lows of $0.20 in March 2020, LUNA was up by over 50,000% when it hit an all-time high of $103 in December 2021.

It’s an indicator that LUNA could easily test much higher prices as long as the cryptocurrency market keeps growing and demand for stable coins increases.

Check Out: Terra Price Predictions

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Terra Could Benefit More From FOMO

Due to its sudden and massive rise in value within a year, a lot more people now know about LUNA and the potential it holds. This means more people could buy into it, in anticipation of more gains not just in 2022, but in all future bull markets.

Cardano does not have the same advantage at the moment. That’s because it is a much older cryptocurrency, and in the last bull market, underperformed most major cryptocurrencies. Since nothing has fundamentally changed with Cardano, it may not draw the same excitement as LUNA in future bull runs. Not to say that it will not gain in value, but in terms of FOMO-driven gains, LUNA has a huge edge over ADA.

Why To Also Hold Some ADA

Despite all the advantages that Terra has both in adoption, and FOMO, there is every reason to have some ADA coins as part of your cryptocurrency stash. This has a lot to do with Cardano’s technical capabilities.

Cardano is a platform blockchain and is an Ethereum competitor. While a couple of other Ethereum competitors seem to have overshadowed Cardano, it is still one of the safest among them. That’s because Cardano is one of the few that answer the three problems of blockchain: Decentralization, Scalability, and Security. To understand how important this is, one needs to look at a network like Solana. While it is a fantastic cryptocurrency, it has prioritized scalability and low fees above all else. The result has been multiple attacks that have seen the network go down a couple of times in less than 6-months.

Cardano does not have such problems, and this could see it attract Dapps developers looking for security and network stability as a priority. Now that Cardano already supports smart contracts, it is very possible that there could be an explosion of DeFi protocols building on top of the Cardano blockchain.

Already, there is a Decentralized exchange building on Cardano. If it turns out to be a success, a lot more could follow, and that’s good for the long-term value of ADA.

Don't Miss: Cardano (ADA) Price Prediction

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

That aside, diversifying into ADA and LUNA is simple financial prudence. Even in the stock markets, it has never been a good decision to go all-in on a single stock. Things happen, and even the best of assets can become worthless.

Such a risk is especially high for a cryptocurrency like LUNA that is heavily focused on stable coins. If negative regulations are effected against stable coins, LUNA could take a big hit and leave ADA standing. So, to reiterate the question, is Terra Luna a better investment than Cardano, the answer is yes, but it pays to diversify.