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What does the future hold? – Forbes Australia Consultant
The future trajectory of any cryptocurrency is a combination of internal dynamics and broader market trends. We reached out to Willemsen to shed some light on the potential bullish and bearish paths for LUNA.
The case of the bull
Many things would have to change for LUNA to have a solid bull case. Not only would it have to catch up with competitors, but it would also have to shake the distrust it has developed from investors and projects due to its past.
The token has risen from an all-time low of $0.40 to $1.21, a gain of 200%, since October last year when cryptocurrency markets showed strength. While this may seem impressive, most projects achieved similar or greater results. Bitcoin, the largest crypto asset, also recorded a gain of almost 200% in the same period.
Willemsen says LUNA could increase in value “if the broader cryptocurrency market enters a sustained bull run.” In such an environment, he believes that LUNA, like many altcoins, will benefit from the cyclical nature of cryptocurrency markets.
“LUNA could benefit from cryptocurrency investors rotating profits into riskier altcoins,” he says. If past trends were reliable indicators, such a change could appear “after BTC, ETH, and major altcoins have been in an uptrend for several months.”
This is already starting to show, with Bitcoin recently surpassing all-time highs following the approval of 11 Bitcoin Spot Exchange Traded Funds (ETFs). for trade in the US and dragging with it many lifeless altcoins, such as LUNA.
While there is no strong bullish argument in favor of the project, anything could happen in the cryptocurrency space.
The case of the bear
The bearish thesis for LUNA in its current state is much stronger. Willemsen says the recent progress of Ethereum, which has traditionally faced scalability issues, presents a challenge for LUNA.
“In recent years, alternative layer one (L1) blockchains, such as Terra, have benefited from Ethereum’s inability to handle significant user demand without fees reaching unsustainable levels,” he says.
But the Ethereum landscape is evolving. “Since then, Ethereum has become a bit more scalable thanks to the proliferation of layer two (L2) solutions known as rollups,” he adds.
Recently, Ethereum implemented the Dencun update, which substantially reduced fees for L2 chains such as Optimism, Arbitrum, and Base chain. Users of these chains now benefit from transaction fees of less than a penny while interacting with a blockchain leveraging the security of the Ethereum main chain.
If Ethereum continues on this path towards better scalability and cheaper fees for users, it could diminish the unique value proposition of chains like Terra.
Further strengthening the bearish thesis, Willemsen highlights the vibrant ecosystems of other alternative L1 blockchains, including formidable contenders Solana, Polkadot, and Avalanche.
“While Terra’s ecosystem of users and developers is vibrant compared to the original chain, it still has its work cut out for it compared to other alternative L1 blockchains,” he says.
With these insights, it is clear that while Terra Luna has potential avenues for growth, it faces formidable challenges.
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