NEW YORK (BLOOMBERG) - If you need a reminder that memories are short in the world of crypto, look no further than the relaunch of the Luna token that played a key role in the Terra blockchain ecosystem collapse, which cost investors billions a little more than two weeks ago.
Hype is already building around the new Luna, which is being reissued as part of a proposal approved on Wednesday (May 25).
Crypto exchanges are already announcing plans to list the new Luna, while advocates are predicting it will surge, using the industry parlance of “to the moon”. This probably is not too surprising as the crypto trading world, much like gambling, often follows the classic “loss-chasing” patterns, where investors may be amplifying their efforts to push the success of the new blockchain in a bet to eventually recoup their prior losses.
The price of Luna jumped about 18 per cent on Wednesday, though it remained at less than a fraction of a cent, data compiled by Bloomberg show. It traded at more than US$100 in April.
Thousands, if not millions, of investors have lost money from the Terra collapse, with prices of Luna and TerraUSD (UST) having both gone down to virtually zero at some point.
The plan seeks to salvage the network after Luna’s affiliated stablecoin, UST, lost its one-to-one peg to the United States dollar and helped trigger a collapse in digital asset prices.
Under the approved measure, developers will create a new Terra blockchain with a revived Luna token. The original blockchain will be renamed Terra Classic, while the original Luna token will be called Luna Classic, with the ticker LUNC.
The new Luna will be distributed to previous holders of Luna and UST in a so-called "air drop" on Thursday.
Whether the price of the new Luna token will "pump" remains unclear. Other than keeping existing projects on the Terra blockchain, the new blockchain will also need support from major exchanges. Having the new Luna token listed on a major exchange would provide more liquidity for the token, which can lead to appreciation of its value.
Crypto exchange Huobi said it would support the launch of Luna 2.0, while OKX said it would support the air drop of the new Luna tokens. Binance, meanwhile, said it is "working closely with the Terra team" to provide impacted Binance users with the "best possible treatment".
Despite the exuberance, blockchain data firm Nansen points out that flows of wrapped Luna tokens, a version of Luna on the Ethereum blockchain, have shown "no evidence" of actual widespread support yet.
Trading volume of wrapped Luna tokens on Ethereum and the Luna token's flow going from Ethereum to Cosmos, the network where Terra is built on, have been "scant" since the approval of the new proposal, according to Mr Andrew Thurman, who is in charge of content at blockchain analytics platform Nansen.
"That might change as word spreads but right now, it looks like the market is tepid on Terra," Mr Thurman said.
