This Token's Relaunch Kicks Crypto Hype Machine Back Into Gear

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 collapse of the Terra blockchain ecosystem that cost investors billions little more than two weeks ago.

Hype is already building around the cryptocurrency, which is being reissued as part of a proposal approved Wednesday. The plan seeks to salvage the network after Luna's affiliated stablecoin, TerraUSD (UST), lost its 1-to-1 peg the dollar and helped trigger a collapse in digital-asset prices. 

Under the approved measure, the original blockchain will split off and be known as Terra Classic, while Luna, which plunged close to zero this month, will be renamed Luna Classic with the ticker LUNC. The new Terra blockchain will start running a coin under the existing Luna name and ticker, and won't include the UST stablecoin. The new Luna will be distributed to previous holders of Luna and UST in a so-called air drop on Thursday.   

Crypto exchanges are already announcing plans to list the token, while advocates are predicting it will surge, using the industry parlance of “to the moon.” This probably isn't 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.

Thousands of, if not millions of, investors have lost money from the Terra collapse, with prices of Luna and UST having both gone down to virtually zero at some point. The price of Luna jumped about 18% on Wednesday, though it remained at less than a fraction of a cent, data compiled by Bloomberg show. It traded at more than $100 in April.

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 they would support the launch of Luna 2.0, while OKX said it would support the airdrop 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 Luna token's flow going from Ethereum to Cosmos, the network where Terra's built on, have been “scant” since the pass of the new proposal, according to Andrew Thurman, who's in charge of content at Nansen. 

“That might change as word spreads, but right now it looks like the market is tepid on Terra [2.0],” Thurman said.