As major cryptocurrencies like Bitcoin and Dogecoin grow more volatile, investors are now running to the more predictable stablecoins. So far, there are only a handful of these cryptocurrencies on the market, but one that has been attracting attention lately is Terra.
Terra, which is currently accepted by cryptocurrency exchanges like Binance, was launched in September 2018.
The crypto seeks to avoid the volatility of Bitcoin and other major cryptocurrencies by tying its US dollar price to an algorithm. The Terra network also includes a reserve token called Luna, which will be used to back up Terra’s stability.
The Luna token recently took a bullish turn after a massive price hike, and many investors are now looking to it as a possible alternative for investing in stablecoins.
In this guide, we will take a look at Terra and its token (LUNA) to find out whether it is worth investing in.
What Is Terra?
Terra is a blockchain protocol that powers the startup’s cryptocurrencies like Terra US Dollar (UST) and other digital assets.
It was created by Terraform Labs, which was started by Daniel Shin and Do Kwon.
The UST is pegged to the US dollar, and its algorithm means it will remain tied to this fiat currency regardless of any price fluctuations happening in other cryptocurrencies like Bitcoin or Ethereum.
Unlike most other cryptocurrencies on the market, Terra’s price is not based on supply and demand but rather an algorithm that keeps it pegged to the USD. As a cryptocurrency pegged to a fiat currency, Terra could increase in value over time, and it is not as affected by price volatility.
What Are Luna Tokens?
Luna are the reserve tokens that are required to back up Terra’s stability. Put simply, each UST is backed by one Luna token. This means that if the number of UST in circulation decreases, then more Luna will be introduced into the market to maintain the stability of UST.
Terra also promises that all Luna used for backing up UST will be sourced from its reserve tokens. This means that any tokens burned by users could potentially increase Luna’s value as supply decreases and leads to a higher demand for this cryptocurrency.
Apart from the US dollar, Terra is also pegged to other currencies such as Euro, British Pound, Japanese Yen, and Indian Rupee.
How Does Terra Work?
As mentioned, Terra was designed to keep its US dollar price stable by linking it to an algorithm. The idea behind this is that the cryptocurrency reduces the volatility endemic to other major cryptocurrencies like Bitcoin or Ethereum.
This stability comes from the fact that the UST does not rely on supply and demand but rather an algorithm that links each unit to a certain number of Luna tokens. These UST and Luna tokens are then used as collateral for transactions.
Terra also ensures that these UST will remain tied to the US dollar regardless of its price fluctuations against other cryptocurrencies like Bitcoin or Ethereum by using an algorithm that links each unit of it to a certain number of Luna tokens.
To give you an idea of how the algorithm works, let’s take a look at an example. If there are 100 UST in circulation and Luna tokens are trading at $1 each, then this means that one UST is backed by 1 Luna token. If the price of Luna increases to $2, then the number of Luna needed to back one UST would also double.
Therefore, the algorithm adjusts itself automatically to ensure that each UST is always backed by a matching number of Luna tokens. This is what makes Terra stable and minimizes price fluctuations, which reduces the stress on users who are investing in cryptocurrencies for trading or other purposes.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Terra Price History
The Terra token is relatively young, which means its price history does not have as much data to analyze. It only started trading in 2019, according to data from CoinMarketCap.
However, there wasn't much activity during the early years of Terra (LUNA), as the coin mostly traded below $1 until late January 2021.
This could mean that there wasn't much investor interest when LUNa first went live on the crypto market. However, in January 2021, as most cryptocurrencies were basking in the glory of a market-wide bull run, Terra quickly jumped aboard and became one of the fastest-growing cryptocurrencies.
On 24th January 2021, the coin was trading at $0.8704 with a 24-hour trading volume of around $21.91 million. However, at the start of February, the price had gone to $2.6846, and the daily trading volume skyrocketed to more than $116 million.
A few days later, on 8th February 2021, the price of Terra tripled to touch $6.4373, then dropped to below $6 in the middle of the month. It then fluctuated for a few days before rising parabolically to hit an all-time high price of $44.34 on September 11th.
Since then, the price has been fluctuating, and Terra lost more than 26% of its peak value. However, LUNA rose again in December and hit its current all-time high price on the 27th - $103.33.
At the time of writing, the coin was trading at $52.28 with a daily trading volume of $2.5 billion and a market cap of $20.9 billion. It is ranked number 9 in the market according to CoinMarketCap.
Terra (LUNA) Price Prediction In 2022
In the long run, the UST coin’s price is expected to stay stable or rise. This can be attributed to how it does not depend on supply and demand but rather an algorithm that keeps its value tied to a fiat currency such as the US dollar.
The Terra token may have a more volatile future simply because of its role in backing the stability of the UST coin. However, Luna may be able to find a stable trading price as well as being counted among some of the more promising stablecoins in the cryptocurrency market.
Based on several predictions that we have seen, the price of Terra (LUNA) is expected to be trading at around $145 to $260 by the end of 2022, and it may show even more growth in 2023 as Terra’s platform continues to gain traction.
For instance, Wallet Investor predicts that LUNA will be trading at $170.92 by December 2022 and at around $304.07 by the end of 2023. While this is not a significant growth from the current price, it would certainly be a noticeable improvement.
Although Wallet Investor is bullish about the future of Terra, it predicts slow growth in 2022. The price tracker believes that LUNA will start 2022 at around $65.31 and drag along to close the year at $170.92.
Long Forecast, on the other hand, seems to be a bit bearish and predicts that LUNA might drop to $50.2 by the end of September 2022. Fortunately, this seems to be the only bearish prediction that we have seen so far.
For instance, Digital Coin Price predicts that Terra (LUNA) will be worth around $68.71 by the end of 2022. Coin Price Forecast is one of the bullish analysts we have seen for Luna.
The site predicts that Terra (Luna) will be worth a whopping $99.66 by the end of 2023, which is about a 91% increase from the current price.
Interestingly, Coin Price Forecast seems to be mostly bullish in the coming years. For instance, it also predicts that LUNA will be worth $158.71 by the end of 2023.
Check Out: Terra Price Prediction For 2025 And 2030
How To Invest In Terra (LUNA)
Terra may be a good cryptocurrency to invest in for those who want a stablecoin with a relatively low price. Its platform continues to show promise as it is being tested by several blockchain projects and is already gaining its own following within the crypto community.
You can buy Luna on several crypto exchanges if you intend to trade or hold for the long term.
Generally, we recommend three ways to invest in Terra;
- Holding
- Trading
- Staking
Here is a summary of what each of these methods entails.
If you are looking for an investment to hold long term, the UST token is your best choice. It is already trading at good value and has good liquidity, which means that it can be easily bought or sold whenever you need.
However, if you want to make quick profits, then Terra (LUNA) may be a better option because of its potential to gain value since it is new to the market. To buy Luna tokens, you can check out Binance or eToro, where they are listed among some of the most popular cryptocurrencies and trade against other currencies such as Bitcoin and Ethereum.
Your third option for investing in Terra comes down to staking. You can purchase LUNA tokens and keep them in your wallet to get daily dividends. This can be a good idea if you are planning to use the platform but may not be the best choice for making quick profits. However, it is worth keeping an eye on their platform because of the potential long-term benefits.
If you want to know how to utilize each of these methods in more detail, keep reading below.
Method 1: Holding
If you have been in the crypto market for a while, then you understand that this method is probably the easiest and most straightforward way to invest in Terra. Simply buy some LUNA coins online from one of the exchanges where they are being traded and store them until the price is much higher than what you bought at.
Remember that holding coins means that your investment will not be immediately affected by the latest market fluctuations, but you will have to wait for some years before it rises in value.
For obvious reasons, this should be your first option if you are just getting your feet wet with cryptocurrencies.
The process of holding (or hodling) Luna tokens is pretty straightforward. All you have to do is:
- Buy some Luna tokens from an exchange that lists them.
- Store the tokens in your personal wallet to keep them safe.
- Wait for their price to rise.
For this reason, you will need to have a good wallet to be able to hold your tokens. Generally, there are three types of wallets that you can use to hold your tokens. These are:
- Hot Storage - These are online wallets that can connect to the internet, but it is important to note that they offer lower levels of security when compared to other types of storage.
- Cold Storage - These are also known as offline wallets, where you can store your tokens until you need them. They are generally considered safer than hot storage because they do not connect to the internet.
- Hardware - These are physical devices that can support a variety of coins and tokens. They are recommended for people who want the highest level of security for their tokens.
If you don't know which wallet to choose just yet, you can start with Terra's default software wallet, known as Terra Station.
For the best hardware wallet, we recommend Ledger Nano S.
Method 2: Trading
If you are interested in getting more profit from your investment, then trading may be a better option compared to holding Luna tokens. Several exchanges allow you to trade in fiat currencies and cryptocurrencies, so this way, you can keep track of the latest developments in the cryptocurrency industry.
If you want to trade Luna tokens, you will first have to buy them from an exchange.
The general principle when it comes to trading is that you can sell your Luna tokens when the volatility of cryptocurrencies is low and buy them back when the price starts to rise again. If you do this, then you may be able to see more profit from your investment going forward.
However, keep in mind that trading is no walk in the park and requires a lot of research into market trends and the latest news to keep you ahead of the curve. This will allow you to maximise your profits and minimise your losses, so it may not be a bad idea to learn more about trading in cryptocurrencies before investing in Luna tokens.
Trading platforms such as eToro allow you to maximize your trading by using an arsenal of tools and indicators that will help you make an informed decision about when to buy and sell Luna tokens.
For instance, you can set a stop-loss to automatically close your trade or take a profit once it has reached a certain level instead of watching the market all day.
If you are not risk-averse, you can also use leverage to increase your Luna trading by borrowing other people's money. This way, you can make more profits but keep in mind that if the price of Luna goes down, you may also lose more than what you initially invested.
Generally, we only recommend trading Terra tokens if you already have some experience in trading cryptocurrencies. Otherwise, you can either hold or stake your coins.
Let's look at how staking works.
Method 3: Staking
The third method for earning from Terra is staking, which is where investors deposit a certain amount of coins into a validator or pool to receive a reward.
Terra staking is, therefore, different from holding since you do not just buy Luna tokens and store them for the next two years. Instead, you are rewarded with a certain number of LUNA tokens depending on how many you have used to stake. This makes it a great passive income opportunity and the more preferred alternative to holding, which only depends on value increment.
The main challenge investors will face when it comes to staking is that they would need an ample supply of LUNA coins in order to make it worthwhile. We recommend that you read more about staking before using this method to earn from Luna tokens.
Having said that, staking has several benefits over holding your tokens in a cold wallet. For instance, you will be able to earn some passive income in form of rewards without necessarily having to trade.
What is interesting about staking in relation to Terra is that it is one of the few stablecoins where this method even makes sense. After all, most stablecoins are backed by conventional currencies like the US dollar, which does not provide the same level of volatility that cryptocurrencies have.
As result, you can earn from both the rewards and the incremental value of LUNA tokens over time.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Is Terra (Luna) A Good Investment?
Just a few years ago, Terra was outside the top 50 cryptocurrencies by market cap but is now ranked top 9 by market cap. Although the crypto is mostly just used in its home base of South Korea, it is quickly growing to become one of the most popular cryptocurrencies.
In fact, if you had bought $1,000 worth of Terra coins a year ago, it would have grown to just above $90,000. That is a plausible 9000% ROI in just a year.
One of the things that makes Terra an epic investment is that it is already being used in real life and continues to widen its use cases.
In fact, the Terra Platform is already responsible for a number of projects. These include CHAI, a service that allows you to transact on your mobile device using Terra's blockchain network.
As of August 2021, CHAI had more than 50,0000 daily active users who are responsive for about 100,000 daily transactions.
Another project is Terraswap, which is an exchange that makes it easy for cryptocurrency traders to switch back and forth between different cryptocurrencies without using a centralized intermediary.
There is also Achor which is a savings and lending protocol that is based on the Terra blockchain.
Generally, if Terra can successfully expand outside the boundaries of South Korea into other countries like the United States, it would be an even greater investment.
This is because Terra is widely used in South Korea and has already proven that it can handle large numbers of transactions without any hiccups.
Fortunately, there is already some progress in that regard. For instance, the Terra USD was recently added to Coinbase, which could help to significantly widen its use and subsequently boost value.
On the flip side, there are some caveats to investing in Terra; mainly that it is a relatively new cryptocurrency, and its market is very competitive with several promising cryptocurrencies like Cardano.
There is also the issue of government regulations which seem to be more focused on stablecoins like Terra right now. This could potentially change in the future, but it is something that investors will need to consider.
Conclusion: So, Should I Buy Terra (LUNA) Tokens?
If you are looking for a long-term investment, then Terra is definitely something that you should look into.
It is currently ranked in the top 9 cryptocurrencies by market cap and continues to grow.
A lot of this has to do with its use cases which continue to scale up, even if they are mostly just in South Korea right now.
However, if you are looking for a quick investment, however, Terra is not the best idea since it is not as popular as other cryptocurrencies.
Additionally, there are some uncertainties regarding government regulations that could make an impact on the value of Terra coins in the future.
Otherwise, the long-term results seem to outweigh the risks at this point, which is why it is one of the best cryptocurrencies to invest in.
However, if you do decide to buy LUNA tokens, make sure to do enough research to make sure that they are right for your portfolio.
eToro – The Best Platform To Buy Terra
eToro have proven themselves trustworthy within the Crypto industry over many years – we recommend you try them out.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
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