In this educational guide, we’re going to explore the altcoin and blockchain named Terra (LUNA). We’ll cover its fundamentals and planned roadmap, so you can use it to make your own price prediction.
What is Terra and how does it work?
Terra is its own native Proof-of-Stake (PoS) blockchain protocol whose primary use case is to create an algorithm basket of stablecoins that target an underlying fiat peg. LUNA is the Terra blockchain’s native token.
The Terra ecosystem offers seven stablecoins at the time of writing, and TerraUSD (UST), keeping a peg to the US Dollar, is the one with the largest circulating supply currently, at over $18 billion as of April 2022. This makes UST the 13th largest crypto asset by market capitalization, and just behind centralized competitors USDT Tether and USDC, who have $83 billion market capitalization and $49.9 billion, respectively.
Terra was created by support from the Terra Alliance and Terraform Labs to meet the blockchain market’s needs for a decentralized, price-stable money protocol that could also be efficiently used for payments. They are now a group of 15 large e-commerce companies in Asia that process over $25 billion USD in transaction volume collectively. The Terra co-founders are Daniel Shin and Do Kwon who started Terra to grow the use of cryptocurrency and blockchain itself in regards to specifically price stability and adoption.
Thus, the Terra ecosystem is not only its own blockchain with decentralized applications dApps) of its own, but also a basket of several stablecoins, and the native LUNA token is the byproduct of its adoption and success. Terra also features a thriving DeFi ecosystem with dApps such as Anchor Protocol for lending and borrowing, among other protocols. This makes Terra one of the fastest-growing ecosystems in crypto with 100+ projects on it across DeFi, Web3, and NFTs.
The aim of the Terra network is to aid in the mass adoption of cryptocurrencies as payment solutions in a censorship-resistant manner, and this is why the network involves algorithmic stablecoins for several fiat currencies (USD, EUR, CNY, and more). Terra achieves price-stability in its stablecoins via an elastic money supply which is enabled by stable mining incentives. The network incorporates strong user incentives to promote greater adoption of the currency as well.
As far as its consensus mechanism, Terra functions inside of the Cosmos Inter-Blockchain Communications Protocol which means it uses Tendermint Consensus. This allows Terra to send both fungible and non-fungible token transfers with other large blockchains in crypto, making Terra interoperable with Ethereum, BSC, Solana, and others via a cross-chain bridge. Based on how this consensus model works, validator candidates can bond their own LUNA and have LUNA staked or delegated to them by token holders. Initially, Terra’s Columbus mainnet had 100 validators, but this was meant to be increased to over 300 over time. The top validators with the most stake became official validators for Terra.
Users on Terra can mint new stablecoins by burning LUNA tokens, and this reduces the available supply of LUNA and increases the supply of the respective fiat currency, such as UST. In this way, the LUNA token is critical in keeping the UST stablecoin pegged at $1 USD. LUNA itself can always be minted at a fixed exchange rate regardless of market conditions (1 UST can always be exchanged for $1 worth of LUNA), and the UST price is held stable by controlling the supply of LUNA in circulation. Because of this relationship between UST and LUNA (and other stablecoins in Terra), LUNA’s value decreases during UST contraction or lack of demand and vice versa. LUNA's token value increases as the demand for UST increases due to its elastic supply relationship.
Terra’s LUNA Token
The LUNA token is the Terra network’s native token. It functions as a payment token for fees on the network, and also for voting on proposals by token holders. LUNA holders earn staking rewards and participate in network governance.
Miners on the Terra PoS network must stake the native LUNA token to participate in validation on the network. There are also other tokens that are a part of the Terra ecosystem, namely the Terra stablecoins which are fiat-pegged algorithmic stablecoins that are pegged to currencies such as the USD, EUR, CNY, JPY, GBP, KRW, and the IMF’s SDR. More currencies can get added to this list by token holder voting.
There were 1 billion LUNA tokens issued at genesis as well as 1 billion SDT (SDR stablecoin).
The token allocation of LUNA is as stated:
- 10% was allocated to Terraform Labs for research & development, plus an additional 4.5% was held by Terraform labs on behalf of investors who did not clear KYC in time for their token sale, so they had to manually claim their tokens instead of via programmatic vesting
- 20% was allocated to the employees & contributor pool
- 20% was allocated to the Terra Alliance, which drove early adoption and usage for Terra. This was also used for incentives such as marketing discount programs and volume incentives for partners.
- 20% was allocated to Stability Reserves. This was meant to manage the network’s early stability close to genesis.
- 4% was allocated to Genesis liquidity
- 26% was allocated to investors
To finance development of Terra, Terraform Labs held three token sales which included a pre-seed sale in May 2018, a seed sale in October 2018, and a private sale thereafter.
Terra (LUNA) Price History & Technical Analysis
As of the time of writing, in April 2022, the price of LUNA is at $96.23, with a market capitalization of $33.45 billion USD. Its circulating supply at the time of writing is 347.6M LUNA tokens.
The total value of the LUNA token and other associated ecosystem tokens in turn grows as the user adoption of the Terra network and its affiliated stablecoins grows. As more protocols, applications, and users utilize UST and other affiliated stablecoins from the Terra network, the LUNA token absorbs the value from such activities and this benefits token holders, validators, and delegators alike.
Metcalfe’s Law states that the value of a network is directly related to the number of users of that network.
As long as Terra and Terraform Labs continue to innovate with their ecosystem, the LUNA price will continue to do well, especially as there is more demand for the token on the open market with more demand for UST.
What Expert Analysts say about Terra:
- Wallet Investor maintains a bullish opinion on Terra, saying that “Based on our forecasts, a long-term increase is expected, the price prognosis for 2027-04-24 is 565.451 US Dollars. With a 5-year investment, the revenue is expected to be around +487.96%. Your current $100 investment may be up to $587.96 in 2027.”
- Coinpedia also gives a bullish outlook for the next few years for Terra, even with its bearish case: “The LUNA network offers competitive programmable payment, logistics, and storage to ease Dapp and stable coin rise. This can attract more investors and may propel the price to $498.26 by the end of the next five years. In case, if the market collapses, the price may plunge to around $316.44.”
- DigitalCoinPrice also maintains a relatively bullish take on LUNA for the remainder of 2022: “As per the forecast data analysis, the price of LUNA is expected to cross the level of $127.10. By the end of the year, Terra is expected to reach a minimum fee of $119.33. In addition, the LUNA price is capable of getting a maximum level of $133.15.”
Terra hosts a vibrant and emerging DeFi landscape, with almost 100 dApps being built on the blockchain. A full directory of these dApps can be found here. These categories include apps in betting markets, derivatives, insurance, lending markets, synthetics, metaverse, and more.
Since launch, Terra and Terraform Labs have also forged key partnerships, the most notable of which has been with Korean mobile payments giant CHAI. Chai works with large ecommerce platforms and boasts millions of users, and became available to all of Terra’s ecommerce partners for payments. This partnership allows Terra and CHAI to work together to find ways to utilize Terra’s technology on the CHAI platform and infrastructure.
Besides CHAI, Terra also partnered with the Solana blockchain to create a high speed token bridge to facilitate the transfer of Terra stablecoins like UST between the two networks. Other key partners of Terra have included Kambria, an open source robotics ecosystem, TomoChain, another public blockchain, Velo Labs, with its federated credit exchange network for stablecoin swaps, and with Hummingbot, an open-source trading platform.
Terra Price Prediction: 2022-2026
Terra’s LUNA token first saw significant bullish price pressure during the beginning of 2021, like the rest of the crypto market at the time. It set a peak of above $20 in March of 2021, and then the price collapsed back down to the low ranges of $4-8 until taking off again in August of 2021.
So while late spring and summer of 2021 was not kind to LUNA at all relative to the rest of the crypto market, its price exploded during August and set a peak of over $100 by December of 2021. This correlated with increasing usage and adoption of the UST stablecoin, which led to growing demand for the LUNA token due to the mechanism of how the two tokens work together to create price stability for Terra’s stablecoins.
Since this peak, the crypto markets have been turbulent during 2022, yet the price of LUNA has done remarkably well, though it saw a flash crash for a few weeks during early 2022, seeing as low as the $40 range for a few weeks, only to recover by late February of 2022 and set a new all-time high of almost $120 in early April of 2022.
As of the time of writing, the price of LUNA remains in this macro area between $80-100. On the weekly chart shown above, LUNA continues to maintain support and should see price appreciation to come as long as the low in the $80 area is held.
As long as the LUNA price remains above the $80 area, it is likely that LUNA will regain price strength and continue to set new all-time highs until the trend changes, and this may be relatively soon due to how strong the LUNA token remains and catalyst events relevant to Terra, such as the addition of bitcoin to its reserves.
It’s uncertain to say when investors can expect the previous all-time-high to be breached again, and fundamental factors will also have a play in this, since LUNA is a major contender now in both the stablecoins sector with its UST token as well as as a native blockchain and in DeFi. It is also possible that a greater economic contraction will occur that leads to overall losses in the cryptocurrency markets. If a contraction occurs and the LUNA price loses the $80 area, we expect it to take longer for a new high to be reached or it may not be maintained for too long, and it could see $70 or lower in the meantime.
Terra Price Prediction 2022
Most analysts predict that LUNA will not see below $80 in 2022, and instead see beyond its previous all-time high during 2022 itself, since the price action was very strong during late 2021 and price came back from the lows to create a new higher-low on the weekly chart above, so the trend remains largely bullish.
We think it is reasonable that if bullish price pressure for LUNA remains despite the overall lull in the crypto markets at this time, LUNA will see higher prices and breach $120 again very soon. If this happens, the next target for LUNA in 2022 will be at $140-145.
Terra Price Prediction 2023
If Terra’s adoption of UST stablecoin and its other stablecoins continues, which it does not seem to be slowing down anytime soon, it is possible that LUNA sees almost $200 by 2023, given that greater demand for Terra stablecoins brings greater demand for LUNA.
Terra Price Prediction 2024
The overall growth of the cryptocurrency markets, especially that of DeFi and stablecoins will contribute to LUNA’s growth, as well as the greater trend of blockchains that are competing with Ethereum in some way.
It should be noted that the growth of Layer-2 scaling solutions as well as scaling technology from the upgrade of Ethereum 2.0 has the potential to eat into LUNA’s competitive growth somewhat, but Terra also has a unique use case built for serving as a payment adoption system with major incentives built into it that other blockchains do not offer.
The market capitalization remains at $33.4 billion in April 2022, and a reasonable but still relatively large 3-5x to reach $110.2 - $167 billion in market cap by 2024 would put the LUNA price at $288-$481 price range or higher by 2024.
It’s not unreasonable to see LUNA hit these prices or higher by 2024 with continued innovation and development of the Terra network and growth of its stablecoin suite.
Of course, positive price pressure in turn is also provided the overall crypto market remains bullish and we can avoid an economic downturn and bear market overall.
Terra Price Prediction 2025
2025 is still far away at the time of this writing and longer term blockchain and stablecoin market and DeFi trends are impossible to predict. However, the growth of user adoption of blockchain overall, of crypto, and the market’s need for greater throughput and stablecoin liquidity that Terra solves in a censorship-resistant and decentralized manner will only increase. However, the UST peg must be maintained without issues as the network grows and as crypto suffers many flash crashes between now and then.
We predict we will see LUNA at $500 or above by 2025 provided no catastrophic economic events happen in the meantime and all goes well with adoption.
Terra Price Prediction 2026
The crypto market overall could be worth $10T or even as high as $15T in total market capitalization by 2026. Depending on regulations and the overall economic cycles, we may see LUNA as high as $550-$600 by 2026, provided development of Terra continues.
None of these predictions are financial advice, and are educated guesses as to where LUNA’s price may be at each time interval. It should be noted that any black swan events such as a catastrophic failure of the Tendermint consensus (unlikely), a hack or major de-pegging of its stablecoin fiat pegs, a cease in development, or other black swan events could impact these predictions significantly.
Terra (LUNA): Conclusion Price Prediction
Terra is a native Proof-of-Stake blockchain protocol that fills the market need for censorship-resistance, decentralized stablecoins with its suite of fiat-pegged algorithmic stablecoins as part of the Terra ecosystem. In addition to this, Terra also hosts almost 100 dApps on its blockchain and offers strong user incentives to grow as a payments solution platform.
Terra’s LUNA token enjoyed very bullish price action during late 2021 after a dull summer and thanks to its use of Tendermint consensus, and the elastic relationship between the LUNA token and the network’s stablecoins, the growing demand for the UST and other stablecoins keeps raising demand for the LUNA token as more LUNA supply is burned.
For now, LUNA continues to hold price support above the $80 area and remains close to its current all-time high which can likely be breached in the coming weeks or months. The network is actively seeing user growth, new partnerships and dApps, and more key innovations, along with continued growth of its affiliated stablecoins, which all point to a very bullish sentiment and prediction for Terra and the LUNA token specifically as an investment.
Of course, the long term outlook of any cryptocurrency is hard to say for certain, however provided that LUNA sees continued development and user growth, it is likely to remain a strong choice of investment for the foreseeable future.
Some may be hesitant to commit their money into an asset for an extended period of time due to the extreme volatility and risk of the cryptocurrency markets. Plus, it is impossible to say for certain which blockchain will win the scaling wars longer term, or if they all have a place in different sectors of the market. Terra (LUNA) investors should keep tuned to the continued peg of UST and other stablecoins on the network, as well as the continued actions of Terraform Labs and the needs of the DeFi and stablecoin sectors of the market.
How is Terra gaining traction?
Terra’s LUNA token is gaining traction thanks to functioning as a strong contender in both the DeFi sector as well as filling the market need for decentralized, censorship-resistant stablecoins with UST and other affiliated stablecoins on the Terra network, which are also available on other blockchains and are pegged to their fiat currency counterparts.
Investors and market participants were interested in its main native token, LUNA, due to the elastic relationship between LUNA and the affiliated stablecoins, and many other reasons that will contribute to the growth of the Terra network, such as the number of dApps being built, among other reasons.
Where can I buy Terra (LUNA)?
LUNA can be purchased and traded only on many exchanges including Binance, FTX, KuCoin, Gemini, Kraken, Bybit, and others. It is not available on Coinbase at the time of this writing. This means that both US and international investors can invest in LUNA, however, since some US exchanges such as Gemini do offer it.
In comparison to other cryptocurrencies, how can Terra secure privacy?
As far as privacy goes, Terra is a public blockchain so privacy should not be expected by default. All transactions are recorded in the Terra ledger of transactions. Privacy is not guaranteed, especially in comparison to other cryptocurrencies or blockchains that are especially known for securing privacy, such as Monero.
Is it possible to stake Terra (LUNA) tokens?
Yes, LUNA tokens can be staked for token rewards that are given to stakers and validators contributing to the consensus of the Terra blockchain.
Why is Terra on the rise?
Terra and its main token for investment and use, LUNA, has been on the rise most notably during late 2021 primarily, thanks to the growth of crypto and DeFi as a whole, but also thanks to the a surge in growth of Terra’a UST stablecoin, which overtook Binance’s BUSD stablecoin in market capitalization and is currently the #13 coin on the market by market capitalization.
Thanks to the growth of DeFi on Terra as well as its major lending platform, Anchor Protocol, which offered 20% APY on stablecoin yield during much of 2021, many investors bought the LUNA token to benefit from growth of Terra’s stablecoin suite and DeFi products.
Is Terra completely anonymous?
No, Terra is not fully anonymous to use, since it is a public blockchain. It is, however, pseudonymous, but depending from where users obtain their LUNA and/or UST tokens, blockchain forensics can track the user’s identity.
Is Terra considered a currency?
Yes, the LUNA token is considered a currency that is used on the Terra network for the purpose of payments for transactions. It can be bought or sold for fiat or other cryptocurrencies and its value may fluctuate.
Is it possible to generate profits with Terra?
Yes, assuming the LUNA token increases in price over time with the continued development of the Terra blockchain, and most notably with the growth and usage of UST and its other affiliated stablecoins. Additionally, as DeFi continues to grow on Terra and more users come onboard to take advantage of the almost 100 dApps, this will also increase the usage and adoption of the LUNA token, which can lead to profits in the long run.
All of this combined will lead to greater user adoption and transaction activity on Terra, which creates higher demand for the LUNA token itself.
All investors must do their own research, due diligence, and ensure that they are comfortable with the amount of risk they are taking. All cryptocurrencies are extremely volatile and risky. Always proceed with caution.
Why do people believe in Terra?
Many analysts and investors believe that the Terra blockchain can bring a unique price-stable payments solution to many industries and thrust blockchain adoption into daily life thanks to the qualities of the Terra stablecoins like UST. People also believe in the team of Terra, and in its large suite of dApps which are bringing cheap and high throughput smart contract functionality over some other competing blockchains.
Is Terra supply limited?
Kind of, but the LUNA token supply is not technically hard capped, though there were 1 billion LUNA tokens created at genesis and this total supply has not changed. According to the Terra whitepaper, any LUNA tokens created beyond 1 billion are automatically burned.
How does the Terra team investigate suspicious or fraudulent transactions?
It is not clear how Terraform Labs investigates suspicious transactions at this time, but fraudulent or suspicious activity can be noted on any of the public Terra blockchain explorers, since all activity is performed on a public ledger. Blockchain forensics agencies such as Chainanalysis can also use methods to surveil public blockchains such as Terra.
This is not financial advice, only observations and speculation. All investors should do their own research and due diligence. The crypto markets are extremely volatile and losing your investment is possible.