Crypto entrepreneur Do Kwon’s attempt to resurrect his failed altcoin Luna flopped on debut, sparking concerns that the new token’s future was over before it began.
Almost as soon as the Terraform Labs CEO “airdropped” deposits of his new token, dubbed Luna 2.0, into users’ virtual wallets this weekend, holders rushed for the exits in an attempt to salvage what little they still could from their original investment.
The value of the new coin promptly plunged 80% to around $5, revealing what little faith the Luna community still had in the governance token. Earlier this month, its predecessor, now traded separately as Luna Classic, entered a death spiral that sent it to zero.
The execution of the airdrop, which favored those who held Luna prior to this month’s collapse over those who subsequently bought in after the collapse, was marred by problems, according to holders.
For one, certain crypto exchanges did not yet support trading in the new coin, limiting demand and preventing many from selling their newfound deposits. But ultimately there was precious little time and no alternative after Do Kwon put his rescue plan forward for a vote.
According to CoinMarketCap, Luna 2.0 is currently trading at $6.47, down from an original price of $17.80 when it launched on Saturday.
The new altcoin resulted from a hard fork in the protocol collectively approved by the community through a majority vote last week. This created a new blockchain that branches off from the existing one, similar to the 2016 decision that created Ethereum and Ethereum Classic each with their own native tokens.
One core problem is that the utility of the new Luna 2.0 token is in doubt, a genuine problem when faith in its predecessor had already been obliterated. Leading crypto exchange Binance, for example, is listing the coin on its Innovation Zone for particularly risky investments.
Get ready for Luna 3.0
Previously Luna had served as a store of value that underpinned algorithmic stablecoin TerraUSD’s peg to the U.S. dollar.
If TerraUSD ever traded higher than $1, traders could exchange it for Luna. It would be destroyed in the process while TerraUSD would be created, until the new supply of Luna’s sister token eventually pushed the exchange rate back to parity. This process also worked in reverse, when TerraUSD traded below a dollar.
The attraction for many was a true decentralized stablecoin that did not need to rely on fiat currency as a reserve to maintain its peg, such as Tether.
Luna didn’t just enjoy support from retail crypto investors: Even prominent professionals such as Real Vision CEO Raoul Pau promoted the Terra/Luna pair created by Do Kwon. Ex–Goldman Sachs banker and CEO of Galaxy Digital Partners Mike Novogratz famously went so far as to tattoo his support for Luna on his arm.
Luna’s crash earlier this month damaged confidence in the crypto ecosystem so severely, the broader market decoupled itself from last week’s rally in tech stocks. It also renewed speculation around a regulatory crackdown on stablecoins.
Now that TerraUSD’s peg has been permanently abandoned and Luna is no longer needed to protect the algo stablecoin’s parity to the U.S. dollar, the coin has lost its entire raison d’être.
This means Luna 2.0 is on the search for a new investment story that gives it value, something Do Kwon hoped to partly offer with his pledge of a 7% staking reward.
Some Luna holders, unironically called LUNAtics previously, had argued against the hard fork. Instead, they favored the destruction of their worthless coins in the hopes this would drive the price higher in a hyperinflationary bonfire of supply.
But sending millions or even billions of Luna into a virtual black hole would be little more than a drop in the bucket for a coin that ballooned to a supply of over 6.5 trillion in the immediate aftermath of TerraUSD losing its peg.
Hopes remain that Luna could find more bids once the coin begins trading on most global crypto exchanges. But for many looking at the first day’s trading, fears remain it could go to zero before they have a chance to cash out.
In which case, get ready for Luna 3, they joke.
This story was originally featured on Fortune.com