But now the team behind the failed coin is back. On Saturday, TerraUSD and Terraform Labs, the startup behind its sister cryptocurrency Luna, began trading a new digital token as part of their revival strategy called Luna 2.0.
“An opportunity to rise from the ashes,” wrote Terraform Labs founder Do Kwon in his plan Announcing new cryptocurrencies.
The token replaces the old Luna cryptocurrency and trades under its ticker symbol LUNA. Investors who lost money in Terraform Labs’ previous tokens may receive some new tokens for free, based on a percentage determined by the company. The old Luna coins are still tradable but under a new name called Luna Classic. It is listed as a LUNC in crypto exchanges.
The new Luna token got off to a rocky start, plummeting more than 75% in value in the first few hours and regaining some of its value in the days that followed. As of Tuesday evening, the coin was trading at just over $8.50 — roughly half its starting price, Under the coin geckoa website that tracks cryptocurrency prices.
But in its ups and downs, the release drew scrutiny from cryptocurrency analysts, investors and critics. They say it underscores a broader problem with the cryptocurrency market: Companies can sell what they want without worrying about regulation or enforcement — putting everyday investors at the greatest risk.
“It was the little guy who was sold the false promise [and] Who was completely torn apart by this,” said Molly Whitesoftware developers running websites Web 3 is going well. “It’s just a colossal failure of regulators.”
A spokesperson for Terraform Labs said the decision to launch the new cryptocurrency was made with the strong support of its community, and the company looks forward to future developments.
In 2018, Kwon, a Stanford University-trained engineer, founded Terraform Labs with the aim of transforming the modern financial system. That year, he created the Luna cryptocurrency. In 2020, the company started selling TerraUSD, which it calls a stablecoin. (These coins typically have their value pegged to a safer asset, such as the U.S. dollar.)
Unlike other stablecoins on the market, Kwon’s TerraUSD is a riskier project, experts say. It is not backed by reserve assets such as cash. Instead, it uses an algorithm to maintain its value around $1 by tying it to the supply of the Luna currency.
For a time, the value of the Luna cryptocurrency skyrocketed, creating a community called “Lunatics”. In early April, it was valued at just over $116. But in early May, for reasons that are not yet clear, cryptocurrency investors began dumping TerraUSD in large quantities, causing it to lose its peg to the U.S. dollar and send Luna’s value out of control.
Over the next few days, Luna and TerraUSD plummeted in value, eventually losing $60 billion in value and causing more than $500 billion in losses to the broader cryptocurrency market, industry data shows.
Many investors were so outraged that they posted on sites like Reddit, Discord, and Twitter how they put all their savings into Luna and TerraUSD, only to disappear within days. Some have posted that they intend to kill themselves. in Taiwan, media coverage said a man committed suicide after seeing $2 million in Luna currency plummet to about $1,000.
But last week, under intense scrutiny from lawmakers and crypto industry critics, Terraform Labs announced plans to launch another cryptocurrency as part of its “renaissance strategy.”
Terraform Labs said it will “airdrop” or give new Luna tokens to many people who lose money, losing 1.03 Luna tokens for every Luna Classic they hold, the company said.
Many cryptocurrency investors express their anger and intentions not insist new coins.
Matt Hougan, chief investment officer at crypto asset management firm Bitwise, said his firm has no intention of investing in new coins. “We’re not going to touch the Luna 2.0 with a 10-foot pole,” he said in an interview.
Hougan said he does not believe stablecoins that use algorithms to maintain their value can work. Instead, they need to be backed by assets. He also believes that the new Luna token will do little to restore the reputation of Kwon and Terraform Lab within the wider crypto investor community.
“The collapse completely destroyed confidence in the team,” he said. “I suspect it just didn’t come back.”
However, Hogan said there may be a silver lining. Similar to 2018, when a spate of cryptocurrency scams surrounding initial coin offerings sparked government scrutiny, he believes the same could happen with stablecoin regulation in the coming months.
“I suspect that the result of this process is more regulation on stablecoins,” he said. “More enforcement action by the SEC. The result is a stronger crypto industry.”
Meanwhile, Web 3’s White is getting great, stating that Kwon’s ability to mint a new cryptocurrency shortly after his previous project failed so dramatically is a function of the broader regulatory and enforcement mechanisms in the crypto world fail. “You can keep doing what he’s doing,” she added. “And that’s exactly what he’s doing.”
Still, she doubts any broad action will be taken against Kwon, even as regulators in South Korea and the United States investigate the collapse.
“I don’t think they’re likely to take any kind of broad action on this sort of thing,” she said. “Or any action that’s actually more impactful than whack-a-mole.”