FX_Professor

Terra Luna- Algorithmic Stablecoins, Destination 145$

Long
BINANCE:LUNAUSDT   Luna / TetherUS
Created by start-up Terraform Labs and its co-founders Do Kwon and Daniel Shin in 2018, the Terra blockchain underpins a decentralized finance (DeFi) ecosystem that creates algorithmic stablecoins. Stablecoins, or cryptocurrencies pegged to reserve assets like the U.S. dollar, are frequently used in DeFi applications like lending or borrowing.

“Terra is the hot dot among the cool kids in crypto right now,” Hougan says. “People love the team behind Terra, and they love all the various applications being built on it right now.”

With nearly $18 billion in total value locked, Terra recently became the second-largest DeFi protocol behind Ethereum, according to data provider DeFi Llama.

What are the risks?
Generally, financial experts warn to only invest as much as you can afford to lose in all cryptocurrencies due to their risks. The potential for large price swings should be considered and understood before investing.

When it comes to Luna specifically, “the bigger risk” is that investors could be subject to losses if Terra’s stablecoins are unable to hold their pegs, Hougan says. Luna acts as a sort of volatility absorption mechanism for Terra’s stablecoins, so Luna’s performance may correspond with that of Terra’s stablecoins, he says.

Though Terra’s stablecoins, including dollar-pegged UST, are performing well now, it’s impossible to predict the future performance of any asset and whether it will be able to withstand high volatility or a bear market.

In addition, it’s important for investors to be aware of any regulatory issues within a protocol.

The U.S. Securities and Exchange Commission (SEC) is currently investigating Terraform over whether it is selling unregistered securities. This subpoena is related to Terraform’s Mirror Protocol, which offers synthetic versions of stocks, and not the Terra protocol itself.

Situation does not look as complicated or dangerous like XRP Ripple's case. Despite the risks our outlook remains positive.

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