The Terra Luna (CRYPTO: LUNA) comeback continues. After blowing up spectacularly earlier this year, Terra Luna is back in the form of Terra Luna Classic (CRYPTO: LUNC), which was formed from the ashes of the original Terra blockchain. In September, Terra Luna Classic was one of the top-performing altcoins, and there are now petitions all over social media for exchanges Coinbase Global and Robinhood Markets to list Terra Luna Classic for trading. At one point in September, Terra Luna Classic was up 400%, bringing with it a lot of attention from speculators.

But is Terra Luna Classic right for your crypto portfolio? Keep in mind: The old Terra Luna went from $100 to nearly zero in a matter of days, dragging down the entire Terra blockchain ecosystem and contributing to the implosion of the crypto industry. Is it really possible that, less than five months after such an epic disaster, Terra Luna is ready for a comeback?

Financial alchemy

To answer this question, you first have to understand that a lot of financial machinations have taken place within a relatively short period of time. After the collapse of the Terra ecosystem in May, the team behind Terra Luna decided to "fork" the Terra blockchain into two different chains. There would be an entirely new chain called Terra 2.0, and the continuation of the original blockchain called Terra Classic. The naming convention was meant to evoke the split of the original Ethereum into Ethereum and Ethereum Classic. Plus, the term "classic" has a sort of warm and reassuring feel to it. It's not really a word one associates with toxic financial products.

From this perspective, Terra Luna Classic is really just a clever rebranding of the old Terra Luna. Nothing new has really been created. It's literally financial alchemy, or turning the equivalent of lead into gold. The goal appears to be to take a crypto worth close to zero ($0.0003, to be exact) and transform it into something that has some sort of value.        

If you're a cynic, it's easy to see this as a desperate ploy by people who lost their life's savings on Terra Luna to get something -- anything! -- out of a failed investment. The old Terra Luna traded for close to $100 when disaster struck, so financial speculators everywhere are watching this saga closely. Even if Terra Luna Classic only makes it back to the $1 mark, it would be a huge financial gain for them. 

Can you rebrand a crypto?

There is an old saying on Wall Street that "You can't put lipstick on a pig," and yet, that's exactly what the backers of Terra Luna Classic are trying to do. They are trying to take a piece of wreckage that's worth close to nothing and convince other people that it is worth something. That might explain the coordinated social media campaign to get Coinbase to list Terra Luna Classic. 

If Coinbase decides to make Terra Luna Classic available for trading, that would provide greater liquidity for this crypto and give it a veneer of respectability. Or, if you prefer, it would be the lipstick on the pig. Right now, there are not a lot of major cryptocurrency exchanges where you can buy and sell Terra Luna Classic, and for good reason.

Good money after bad

When you add in the fact that the original founding team of Terra Luna is now facing legal jeopardy in jurisdictions around the world, including in Terra's home country of South Korea, you can start to understand better why an investment in Terra Luna Classic is potentially so toxic. Even Interpol is interested in talking with Terra's founder, Do Kwon. There is a distinct possibility that, even if Terra Luna Classic continues to pump -- in crypto lingo -- it could still all go to zero in a matter of days, just as the original Terra Luna did. 

There are plenty of other speculative cryptos out there that have a better chance of making a huge return for you. Don't throw good money after bad. The great writer F. Scott Fitzgerald once remarked, "There are no second acts in American lives." If he were alive today, he would probably agree, there are no second acts in the crypto industry, either.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Crypto is struggling, but one high profile investor thinks there is more to it.

Mark Cuban has become renowned for his successful venture capitalist career in the early 2000s. He invested in some of the first social networks and software to come around and has since seen his net worth climb to nearly $4.7 billion.

Since he's no stranger to innovative technologies, it comes as no surprise that Cuban has been a vocal advocate for what cryptocurrency and blockchain technology has to offer. He made headlines in 2021 when his National Basketball Association basketball team, the Dallas Mavericks, said it would accept Dogecoin for merchandise and tickets.

Cuban is more than just a fan of Dogecoin. He considers himself an Ethereum maximalist, which means he believes in Ethereum more than other blockchains. He has also made plenty of purchases in the NFT (non-fungible token) market.

While his investments, like many others, are worth considerably less than just a year ago, Cuban remains optimistic about the direction crypto is headed.

Cuban's thoughts

Despite the recent pullbacks and talk about a crypto winter, Cuban believes this decline in prices is healthy and necessary to weed out weak competitors in the crypto economy. In a recent interview he said that the recent bull market fostered an environment for companies that didn't actually have "valid business prospects" to stick around longer than they should have. He made reference to a famous Warren Buffett quote that seems fitting, "When the tide goes out, you get to see who is swimming naked."

Given current macroeconomic factors like inflation, rising interest rates, and the slowing economy, it makes sense that the blockchains and cryptocurrencies that have failed to provide any real-world value would suffer the most.

In addition, events in the crypto market that have recently transpired have only added to the less-than-ideal macroeconomic factors. When the Terra blockchain imploded in early May as the result of its UST stablecoin losing its peg to $1, it caused a widespread market sell-off.

And just last week, one of the most popular crypto lending platforms, Celsius, announced that it would halt withdrawals as the result of the poor economic conditions. This announcement sent all cryptocurrencies down even more.

Yet despite all of this, Cuban still thinks there is hope and value for crypto over the long haul. Specifically, he believes bear markets force companies to innovate. Cuban elaborated, saying, "Disruptive applications and technology released during a bear market, whether stocks or crypto or any business, will always find a market and succeed."

A final thought

Mark Cuban has seen his fair share of bear markets. It seems that in his opinion bear markets should be a cause for concern but not a cause for hysteria. 

Bear markets create opportunities for blockchains and investors alike. Cryptocurrencies that continue to develop innovations in a bear market position themselves for long-term success. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post What one tech guru thinks of the current crypto market appeared first on The Motley Fool Australia.

What happened

Forget "crypto winter," it's an all-out cryptocurrency apocalypse in the market right now. Top tokens Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH), and Solana (CRYPTO: SOL) hit their lowest levels this year. For Bitcoin and Ethereum, these were lows not seen since late 2020/early 2021. Late last night, Bitcoin, Ethereum, and Solana traded as low as $20,951, $1,095, and $26.06, respectively. 

As of 11:30 a.m. ET, Solana has bounced 10% over the past 24 hours, with Ethereum eking out a small gain of 0.7%. That said, Bitcoin is currently in the red, dropping another 2.6% over the past 24 hours, though still well above yesterday's lows.

These incredible moves lower among top tokens many view as stores of value appear to be driven by three key factors.

The first is a deteriorating macro environment for risk assets. The Federal Reserve is set to hike interest rates again tomorrow. And following a rather dismal CPI print earlier this week, it's now widely expected that this hike will be of the 75-basis-point variety (only 50 bps, or 0.5%, was previously priced in).

Secondly, potential systemic fallout from crypto lender Celsius (CRYPTO: CEL) continues to reverberate across the sector. On Sunday, Celsius announced it was freezing withdrawals, signaling that liquidity and solvency may be an issue for this lender, which could have broad impacts on the crypto market. Adding to this intriguing story were rumors that Celsius CEO Alex Mashinsky had been arrested by the FBI.

Finally, Binance, the world's largest crypto exchange by volume, also announced yesterday that the exchange was freezing some Bitcoin withdrawals. This was blamed on a "stuck transaction" which caused a backlog on the network's back end. While this problem appears to be resolved, questions are now permeating the sector around just how stable the crypto ecosystem is to price shocks.

So what

There's a lot of news to take in right now. In many ways, this week has been one of the most eventful for crypto investors in some time. Indeed, while many investors would hope for some semblance of normalcy to take over at some point, it appears negative catalysts continue to find a way to float to the top in 2022.

There's not much investors can do about the macro environment. Liquidity is going to be pulled from the system from some time, and this will have its effect on the crypto market for sure.

However, it's the potential systemic risks relating to crypto lenders and exchanges that's now worrying investors. We all saw what happened when Terra's (CRYPTO: LUNA) stablecoin ecosystem imploded. If lower crypto prices mean stablecoins, crypto exchanges, and lending platforms won't work, that doesn't make for a bullish long-term case for this sector.

Now what

To be fair, the crypto market hasn't gone through a true "stress test" via a recession yet. And while we can debate whether we're already in a recession, or if a recession will even materialize, it's clear that this environment is perhaps the most unstable the crypto market has seen since its inception. 

Accordingly, 2022 is shaping up to be a volatile year for investors. While I'd like to be able to call a bottom for these top tokens, until there's some signs of capitulation in the markets, it's unclear we're close to the end of the selling. I'm buckling in for what could be a very bumpy ride right now. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 reasons Bitcoin, Ethereum and Solana just hit their lowest levels this year appeared first on The Motley Fool Australia.

At the time the algorithmic stablecoin, UST, was among the leading tokens pegged to the US dollar. And Luna had a market cap of some US$28 billion.

By 12 May the collapse of the tokens and the blockchain that supports them was well underway. UST was down 70% and Luna had dropped 97%.

With the cryptos entering what's called a 'death spiral' as crucial investor confidence evaporated, things only got worse from there.

Unable to rescue the original tokens, Terra co-founder Do Kwon and his supporters have pressed through with the launch of a new Terra blockchain, supported by two new tokens.

Namely TerraClassicUSD (CRYPTO: USTC) and Luna 2.0 which is called, well, Terra (CRYPTO: LUNA). Rather than rebrand the new Luna 2.0, the company changed the name of the original to Terra Classic (CRYPTO: LUNC).

UST itself is no more, and its blockchain has been officially halted. As for LUNC? It's gone from US$86 this time last month to 0.0081 US cents.

Can Terra's Luna 2.0 avoid another 'death spiral'

As part of the rescue plan, Terra 'airdropped' the new Luna tokens to existing holders.

But according to Thomas Dunleavy, senior analyst at crypto research firm Messari (quoted by Bloomberg):

The airdrop was really poorly structured. It rewarded equity holders – LUNA holders – over savers or bond holders – Anchor depositors or UST holders. Any network in crypto is built on trust, by not only users but also builders who commit their time and capital to grow the network.

So, can Terra's Luna 2.0 avoid a repeat of what happened to 1.0?

Time will tell.

But it's not off to a great start.

According to data from CoinMarketCap, the Terra Luna 2.0 price currently stands at US$5.11. That's down 74% from the US$19.54 the token was worth on 28 May.

The post Can Terra's Luna 2.0 avoid another 'death spiral' appeared first on The Motley Fool Australia.

When all was said and done, the market cap of the combined crypto market fell 28% in May.

What went wrong for crypto prices in May?

Investors were hit on several fronts in the month just past.

The biggest drag on crypto prices was rising interest rates from some of the world's leading central banks.

Market watchers were particularly focused on the US Fed, which boosted the target cash rate by 0.5%. With inflation running hot, the Fed, and here at home the RBA, have flagged a series of additional rate hikes ahead in 2022.

This year has seen digital assets track closely in line with risk assets, like the tech-heavy Nasdaq. While the Nasdaq bounced towards the end of the month, it was down 9% by market close on 24 May.

Most crypto prices were down significantly more, in part due to another big tailwind that surprised investors in May. Namely, the collapse of leading stablecoin – TerraUSD (CRYPTO: UST).

On 12 May, Terra's UST token lost its peg to the US dollar, eventually falling all the way down to a value of just 10 US cents. Terra (CRYPTO: LUNA) – the token intended to help UST maintain its US$1 peg – lost more than 99% of its value.

News of the collapse roiled the crypto community and saw almost every top crypto sell off.

How did some of the top tokens perform in May?

Size was no comfort for crypto investors in May, with the biggest tokens and most popular names falling heavily during the month.

Bitcoin (CRYPTO: BTC), the world's original crypto, which commands 46% of the market's total valuation, dropped 17% in May.

The second-biggest digital token, Ethereum (CRYPTO: ETH), fell 27% over the month.

The popular meme token, Dogecoin (CRYPTO: DOGE), fared even worse, losing 37% in May.

Only a handful of crypto prices managed to finish May even slightly in the green.

Among those, Tron (CRYPTO: TRX) stood out as the clear leader.

Tron, CoinMarketCap tells us, is "a decentralized blockchain-based operating system developed by the Tron Foundation and launched in 2017".

Depending on your time zone, Tron commenced May trading at 6.8 US cents and finished the month at 8.1 US cents, up 19%.

At the current price of 8.3 US cents, Tron ranks as number 13, with a market cap of US$7.7 billion.

The post Why did crypto prices get massacred in May? appeared first on The Motley Fool Australia.