According to a report by Investopedia, stablecoins are becoming popular by the day. Their value is pegged to another stable source, like the USD or gold. This makes them quite popular because they offer stability within the volatile crypto market.
Terra claims to be one of the most reliable stablecoins in the market today. One thing that sets it apart from other stablecoins is that it is pegged to the US dollar using an algorithm. This implies that the value of Terra is set by a computer. Although this technology sounds new, it has been used for decades to peg currencies in smaller regions where fiat money isn't widely accepted.
In this guide, we explore Terra price predictions and whether or not you should invest in this asset.
What is Terra (LUNA)?
Terra was launched in 2018 by the founders of Luna. The currency is designed to be a stablecoin that decouples itself from other cryptocurrencies. By doing so, it makes the cryptocurrency less volatile than others, which makes it great for storing value over long periods of time.
Terra is pegged to the US dollar. For this reason, it can be used to reduce the volatility that's innate in cryptocurrencies like Bitcoin.
Terra currency is mainly used as an avenue for exchanging goods and services. It has a decentralized exchange where people can trade Terra for other cryptocurrencies or fiat money, including the US dollar.
Terra's native token is called Luna. It has a total supply of 996,430,346 LUNA tokens, with 400,163,949 tokens in circulation.
Terra was founded in 2018 by a South Korean firm known as Terraform Labs, which is headed by Daniel Shin and Do Kwon, who is the current CEO. Kwon is a former Microsoft employee, while Chain is the header of Terra's partner company, Chai, an online payment service.
Terraform Labs has raised around $57 million in funding and continues to expand its core products.
How Does Terra Work?
Terra works in a very simple way. The developers claim that the coin is pegged to the US dollar using an algorithm. This ensures that its value remains relatively stable compared to other cryptocurrencies on the market.
The only drawback with this system is that it slightly reduces Terra's decentralization because holders can't decide how much each token should be worth.
The good thing about this is that it makes the coin easier to use as a medium of exchange since its value remains stable. Also, users don't need to bother about price volatility when using Terra as a store of value.
In comparison, stablecoins like Tether are usually pegged to traditional currencies like the US dollar using cash instead of an algorithm.
The Terra US dollar token is usually referred to as UST. Now, to help stabilize the price of this token, another token and reserve asset known as LUNA is used.
Here is what happens:
In order to mint new UST tokens, a certain amount of Luna is "burned". This means that the tokens are destroyed so that an equal amount of UST can be minted.
As a result, when more people start using UST and its demand increases, more Luna is automatically burned and then sent to a community pool. This way, the price of UST remains stable while the price of Luna increases proportionately to the rise in demand for UST.
According to Terraform Labs CEO Do Kwon, “Luna directly benefits from the economic growth of the Terra economy, and it suffers from contractions of the Terra coin,”
So, for example, when someone buys coffee using UST, a certain amount of fee is generated from the transaction. Just like it happens with credit cards. The only difference is that this fee is not kept by the company but distributed to people who own Luna tokens.
You know, like stock dividends.
Terra (LUNA) Price History
Terra has consolidated between $70 and $99 per coin for some time now. It currently seems to be on an uptrend, and more investors are jumping aboard. While the coin recently adopted a bullish momentum, it has not always enjoyed a linear trajectory.
According to the price tracker, CoinMarketCap, Terra started trading in mid-2019, and its lowest price was $0.1199 on March 13th, 2020.
However, when it first landed on the market, it was going for about $1.3 per coin, which is quite impressive for a new stablecoin. When the launch excitement finally fizzled out, Terra began dropping and traded below the $1 level from September 2019 until late January 2021.
As you probably already know, there was a bull market starting in late December 2020 to around May 2021 that cut across the market. Most cryptocurrencies achieved new milestones, and Terra was not left behind.
And while this digital asset joined the bull run a bit late in late January 2021, it was able to pick up, and its price shot up sharply.
By around April 9th, 2021, Luna was already trading at $6.119, and in late March, it jumped to above $20. This was, of course, a hastened growth, and soon a correction came calling.
The price began dropping gradually until around mid-May, when it recorded a sharp plummet that saw Terra bottoming out at as low as $4.1. It then bounced between $4 and $9 until Mid-July, when the stablecoin recorded one of its biggest jumps.
Between July 16th and August 19th, 2021, Luna jumped from $6.5 to around $30.65. That is a more than 371% gain in just about a month.
From here, the price fluctuated upwards, and in December, 2021, it achieved its all-time high price of $103.33. While most investors expected Terra to slump sharply after recording this high price, it has been tenacious and seems not in a hurry to go below the $50 mark.
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Terra (LUNA) Price Predictions in 2022
Some people have argued that the real price of Terra is much lower than what it's being traded at. The fact that there are over 900 million coins in circulation makes the token more abundant than Bitcoin, which has 21 million, for example.
However, investors believe that this can be changed if Luna becomes more widely used as a medium of exchange, even though it is unlikely to happen in the short term.
In addition, since this coin is mainly being traded as a store of value, not a medium of exchange, there's a chance that traders will start selling their coins for profit once its price starts rising rapidly.
However, it's worth noting that some analysts have projected that there can be a massive price surge in 2022.
- This coin has a relatively low market cap compared to other coins like Ethereum and Bitcoin, which makes it more volatile than them. Therefore, it might be highly affected by any major price swings that occur in BTC or ETH.
- It is likely to have more use cases in the future as it has already made significant progress in its quest to become a truly decentralized blockchain.
- It is expected that this coin will be added to more exchanges which will make it even easier for people to buy and sell the tokens, thus increasing its market cap.
While no one can accurately predict what the price of Terra coin will be this year and beyond, some experts believe that it can surpass its all-time high of $103 by 2022.
For instance, FX Street predicts that if the current uptrend continues, Terra might gain 120% and jump to $200 by the end of 2022. However, for this to happen, the coin will need to quickly flip any barriers into support floors and open some space for its bulls to drive the price up.
Digital Coin Price predicts $68.71 by the end of 2022, while Wallet Investor gives a more bullish prediction at $170.92 by the end of 2022.
So, by the end of 2022, we can probably expect Luna to trade between $230 and $260.
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Terra (LUNA) Price Predictions in 2023
At this point, it is likely that the value of Luna will be highly affected by the US dollar.
If more people start using UST as a store of value and not just a medium of exchange, then its price can rise to new highs.
In that case, the price of Luna will rise dramatically because it is tied to the value of UST.
However, it is unlikely that this LUNA coin will hit $500 anytime soon unless there's a major change in the market. For example, Coin Price Forecast sees LUNA going only as high as $392.40 in 10 years time.
And even though we are hopeful about the future of Terra, we might have to put a pin on these predictions and see how the market plays out in the long term.
However, for the more conservative predictions, Wallet Investor believes Terra will end 2023 at $304.07, which might be the highest price for that year. On the other hand, Digital Coin Price is a tad less bullish and predicts $75.49 by the end of 2023.
Terra (LUNA) Price Predictions in 2024 - 2025
Here is one thing that can happen in 2024 and 2025; If more people begin using Terra as an alternative to traditional currencies like gold and fiat money, then this coin will have a much higher market cap than other coins.
However, if this token has more use cases as a medium of exchange in the future, then it might take over some big competitors and become one of the most valued cryptocurrencies.
While there are no guarantees that this coin will increase in value, people believe that Terra has a lot of potential, and its price may surge in 2025.
Of course, it is unlikely that any predictions we give for 2024 and 2025 will come true. However, they are still very important since they give an idea of how the market might move.
Coin Price Forecast is still astonishingly bullish and predicts that Luna will hit $263.93 by the end of 2025 and more than $273.98 by the end of 2026.
With the current growth trajectory, the price might not go as high, but this is a good sign, and it projects a positive outlook in the next five years.
Generally, these predictions are not absolute, and you shouldn’t use them to make important investment decisions. They only show you on the market might play out, but they are not anywhere near accurate. So, when looking to invest, you should take more time to study the market and do your own research instead of merely relying on predictions from experts or price algorithms.
The Future of Terra: Will the Value of LUNA Rise?
According to the company, Luna is not its main focus. The team behind Terra has said that it will work on building the Terra ecosystem instead of focusing on the price of Luna.
However, if you ask us, investing in Luna makes perfect sense since people who invest in this coin are really investing in the entire Terra platform. So, while the price of Luna might not rise as much as other cryptocurrencies, it will definitely grow as the platform itself grows.
So, while you might not see a return of thousands of per cent, it is possible to make an easy profit by investing in Luna. That's because the supply of Luna tokens is not fixed and will continue to increase as long as Terra is successful.
This means that even if the value of each token remains stable, the number of Luna tokens you own will automatically increase as more people start using Terra.
Factors that Will Affect the Value of Terra in the Future
While we cannot predict with accuracy how much Terra (LUNA) will be in the next five or ten years, there are a few factors that will affect its price.
- The number of tokens in circulation. The more tokens there are, the less buying power each one has as a result of increased supply. This means that as more people adopt Terra, the demand for LUNA should rise as well.
- Terra’s ability to handle transactions, network speed, and security should also be considered when trying to predict how much LUNA will be worth in the future.
- Competition from other stablecoins is another factor that should be considered. A rising number of competitors will put downward pressure on the value of Luna as more people look for ways to stabilize their upcoming cryptocurrency investments or increase their profits using stablecoins.
- Adoption rate and use cases will also affect the value of LUNA. A higher adoption rate and more use cases will drive demand for UST, increasing Luna’s price. On the other hand, a low adoption rate and scarcity of use cases will make it less valuable.
- The team behind Terra: While there are many questions surrounding this platform, one thing is certain: the team behind it is one of the best in the industry. It is composed of highly qualified and experienced people who have already made a name in the crypto world.
So, although we cannot guarantee that Luna will become much more valuable than it is today, you can be sure that this cryptocurrency has a bright future ahead of itself.
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Conclusion: Is Terra (LUNA) a Good Investment?
The team behind Terra seems to know what they are doing, and they have a solid business plan. While it is true that this coin has a long way to go before becoming a major player in the cryptocurrency world, many people believe that there is huge growth potential hidden within its token supply structure.
As usual, investing in cryptocurrencies comes with its fair share of risks, so you should do your research before investing in any of them. With that said, Luna seems to be a safe bet when compared with other cryptocurrencies available today.
As far as Terra is concerned, it will likely become popular eventually because the Terra platform offers solutions for some of the most pressing problems facing both new and traditional cryptocurrencies.
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