CNBC's educational platform CNBC Make It released an explanatory long-read to discuss possible pros and cons Terra (LUNA) that enthusiasts should consider while holding the token.
LUNA performance might be affected by UST peg reliability and regulatory issues
In his interview with CNBC's Taylor Locke, Matt Hougan, chief investment officer at Bitwise Asset Management, named two main groups of risks associated with buying and holding Terra (LUNA), a core native asset of Terra high-performance blockchain platform.
Terra is 'hot among the cool kids right now' as its token Luna hit an all-time high. Here's what investors should know https://t.co/gFiE0IzpaL— CNBC Make It (@CNBCMakeIt) December 27, 2021
First of all, Terra's stablecoin UST should keep its 1:1 peg to the price of U.S. Dollar. As LUNA tokens are utilized in UST mechanisms, the performance of the two assets can affect each other.
Then, regulatory issues with stablecoins should also be considered by potential investors. CNBC's speaker recalled that Terra's company, Terraform, is now being investigated by the U.S. Securities and Exchange Commission.
The watchdog's investigation is related to Terraform's Mirror Protocol, which is a platform for synthetic assets. The SEC filed an action against Terraform to know whether it is selling unregistered securities.
Is Terra the new Ethereum?
As covered by U.Today previously, Terra and its token, LUNA, are in the spotlight in Q4, 2021. Recently, LUNA smashed the $100 mark and exploded onto the top 10 assets by market cap.
Yesterday, Galaxy Digital CEO and seasoned Bitcoin (BTC) proponent Mike Novogratz recommended that CNBC replace Litecoin (LTC) with LUNA and SOL in its ticker board.
Both platforms fascinate him with their high community-driven activity and the interest dApps developers have demonstrated toward building on the top of Terra and Solana.