The best crypto investment idea I have found thus far is Terra Luna. What makes Luna different from other tokens is that it is not just a token that is used to pay for gas fees on the network. Luna is much more and here is why.
Terra is in the business of decentralized algorithmic stablecoins (UST). To mint an additional dollar UST, a dollar worth of Luna must be burnt on the other end. The reverse is true. Hence as the demand for UST grows, more Luna will have to be burnt to support the growth thereby reducing the circulating supply of the token. As demand for Luna tokens increases and liquid supply decreases, it presents a huge upside potential for prices.
But why would people want to buy Luna tokens? It is because Luna is the underlying ecosystem token for Terra and all transaction fees made on the Terra network accrues back to Luna stakers. Outside of crypto, Terra also has a fintech app called CHAI in South Korea where users/merchants pay/accept in Korean won for their day-to-day activities. But on the backend, it is converted to Terra KRW and transactions are settled on the blockchain with fees accruing back to Luna stakers.
Unlike 95% of the current projects, Terra has a real-world use case with 2.5 million users and about 50,000 daily active non-crypto users using the Terra blockchain. In Dec 2020, CHAI raised a $60m Series B from Hanwha, Softbank, and other strategic partners with the end goal to expand CHAI in other neighbouring countries such as Taiwan, Thailand & Vietnam.
Terra has a twin-turbo engine both off-chain (CHAI) and on-chain (dApps on Terra) that ultimately benefits the Luna token. Its LTM network revenue stands at about US$8.6 million and about US$6.7 million annualized on CHAI based on the last 3 months. By owning Luna, you own a stake of the fees generated from its growing network.
Adding on to the leverage is the supply of Terra stablecoins directly influences the supply of Luna tokens. UST is the largest decentralized stablecoin in crypto and the fastest-growing stablecoin by market cap expanding 37,000% YTD from $7m to $2.6b. Each Luna would become more valuable as UST continues to trend upwards and Luna token supply contracts.
Hence the token value of Luna is a function of UST demand growth, the number of dApps on the network and transaction volume/velocity.
The bullish catalyst for Terra Luna is Solana wormhole v2 and its Columbus-5 upgrade to Terra 2.0. Terra is built on top of Cosmos SDK and the upgrade allows terra assets to be transferrable across other cosmos chains through the IBC protocol. This means more utility and adoption for UST as most blockchains lack a decentralized stablecoin for their applications.
Internally, there are dozens of protocols that are about to launch on Terra after the Columbus-5 upgrade is completed. This would bring in a huge influx of users, liquidity and a proportional amount of Luna must be burnt to fuel the increased demand for UST. In about a month time from today, TVL for Terra ecosystem would grow exponentially and UST market cap ($2.6b) might multiply 2-3x potentially overtaking MakerDAO DAI’s pole position of $6.2b.
Terra’s Mcap/TVL is about 1.56 as compared to Ethereum (3.03), Binance (3.44), Solana (4.75), Polygon (1.9) and Avalanche (5.0). At current TVL, it only has 8 dApps and close to 50 more are coming in soon by year-end. Based on the history from Solana, Avalanche, BSC, Polygon, prices follow TVL.
If we count the number of unique addresses that have a daily balance > 0, Terra is still very early as we have only onboarded half a million new users this year. The last time Luna sees 100k new monthly users in Feb & Mar, prices did a 1000% return skyrocketing from $2 to $20.
In conclusion, the bullish thesis for Terra Luna is as new dApps launch after the Columbus-5 upgrade, new users would come in, UST demand will expand, TVL increases, Luna’s supply would decrease, and the combination of these events would create an unstoppable flywheel effect that could propel the token price upwards by a big magnitude.