Contributor, Benzinga
May 11, 2022
verified by Ryan McNamara

Think Luna will drop lower? You can short the token on FTX, or buy it on Gemini!

Terra (Luna), the cryptocurrency backing the UST stablecoin, took a massive hit in market capitalization in May 2022. The LUNA token is most recognized for backing a stablecoin pegged to the US dollar, TerraUSD (UST). 

While the entirety of the crypto market was tumbling, the LUNA price saw one of the worst dips, losing over 90% of its value. While macro factors played a role, the instability of LUNA’s stablecoin UST caused panic for both UST and LUNA holders.

With LUNA well off its highs, some may see a buying opportunity. However, a bottom is difficult to calculate for this token, especially when the price plunges. Downwards pressure on Bitcoin will almost always cause the majority of altcoins trading lower, further murking the waters for LUNA’s future. 

Disclosure: ²Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts

Can Luna Drop Lower Than $1?

It is quite possible that LUNA drops below $1. With the token trading around $75 at the beginning of May 2022, it’s already plummeted to less than $1 for brief moments. And with no bottom found, the flight out of LUNA could worsen. As of writing, LUNA is trading at a mere $2.20 per token.

There is also a possibility that the price sees a drastic reversal if the UST regains its peg to $1. However, because you can redeem 1 UST for $1 worth of LUNA, arbitrage opportunities exist that could impact the price of LUNA.

Why Is Luna Going Down?

Luna’s decline in price was ignited by a number of factors, most importantly was UST losing its peg to $1 and dropping to as low as $0.68. This occurred when UST dipped just slightly below its $1 peg, which is not uncommon for stablecoins but was becoming a clear problem for UST. The volatility of the broader markets exacerbated the situation, and soon, UST holders were cashing out of the coin altogether in exchange for other stablecoins. 

With Terra Luna failing to serve its purpose in stabilizing UST, the price per coin began to drop rapidly. Just over a month ago LUNA was trading at roughly $115 per coin. Following UST’s depeg to the dollar, the LUNA token now trades below $3 per coin.

How to Short Luna

If you are looking to short LUNA, both FTX and ByBit offer short selling features. However, if your IP address shows you are in the United States this action is prohibited. Other ways to short the coin would be through a decentralized exchange such as Uniswap, which offers leveraged tokens that rise in value when a token falls.

Can Luna Still Hit $100 In 2022?

Just a couple of months prior to this drastic drop in UST price, Luna was recognized as one of the most trusted stablecoin projects. While this news is horrible for the short term, there is still hope for Luna to regain its prowess as a true stablecoin competitor.

First, a UST repeg must happen, followed by improvements in the algorithm, and finally, restored faith from the crypto community. None of which are guaranteed to happen, let alone happen in 2022. A pump in the broader markets would also be pivotal in helping Luna reach $100. While this perfect storm is unlikely, it is not out of question.

Where to Buy Luna Tokens

The trading platform Gemini supports the buying and selling of LUNA, if you are looking to trade the asset. Continued instability could lead to further regulation of stablecoins as the US was already wary of them, making it more difficult to find supportive platforms for projects such as Terra Luna.

Will Luna Keep Crashing?

If UST fails to regain its peg to the dollar, then it is very likely that Luna will continue crashing. Even if it does restore its stablecoin status, there is going to be a lot of faith lost in the stablecoin, thus, lost faith in LUNA. Therefore, a token that might solve its problems, return to its dollar peg, and even gain value, might not have the adoption rate that it once did, and this is why cryptocurrency investors must research their trades carefully. You don’t want to miss out on Luna, but you also don’t want to lose extra money because you assumed you were “buying at the dip”.

The purpose of a stablecoin is defeated if it is capable of crashing well below its allotted value. With competition among stablecoins hot, money is likely to pour into competitors DAI, USDC and Tether. For LUNA to regain its price, there must be a return in consumer confidence in the UST stablecoin, which often takes time.

Look at, for example, IBM—once the most adopted computer brand in the world—that needed to be saved by Lee Iacocca (who went on to save Chrysler.) Today, IBM technology is extremely popular, but at one time, it was the company that let Bill Gates get away. Choose your investments wisely, and don’t invest any money you aren’t prepared to lose as all investments involve risk.

Is Now A Good Time To Buy Luna?

Luna is trading at a large discount relative to its price just a month prior. However, this price drop is warranted by its inability to stabilize the UST. With UST losing its peg to the dollar, there is no purpose for its existence. With that being said, it’s still possible that UST is able to regain its peg to the dollar. If this happens, there is still a long road ahead of learning and improving upon the protocol, as it is clearly insufficient. It will be up to the markets to decide if UST and LUNA can be trusted again.

Frequently Asked Questions


Should you invest in crypto?


Investing in crypto is a good way to diversify your investments, and you can learn about the industry on the exchange of your choice while creating a strategy and allocating funds to this purpose.


Should you invest in LUNA?


You should research all investments like LUNA quite carefully before investing. This could turn out to be a good investment, but only time will tell.

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