2021 was the year of Ethereum (ETH -2.57%).
The proof-of-stake cryptocurrency stormed the charts, gaining 400% to become a legitimate challenger to Bitcoin's (BTC -3.57%) crypto supremacy.
The NFT (non-fungible token) craze was a big reason for its surge last year as Ethereum became the preferred blockchain for minting and selling NFTs and making smart contracts. The boom also demonstrated that Ethereum has more utility than Bitcoin. In fact, so far, Ethereum seems to be the most useful cryptocurrency.
However, 2022 has been a different story. Year to date, Ethereum is down 14%. NFTs seem to be fading from the limelight, and most major cryptocurrencies have fallen as well, with Bitcoin down 10%. Risk assets, in general, have had a rough year, with the S&P 500 down 6% as high inflation, rising interest rates, and the war in Ukraine have all driven a flight to safety.
If you've missed out on Ethereum's big gains, don't fret. There are still under-the-radar opportunities in cryptocurrency, and one of the most compelling ones today is Terra (LUNC -6.83%).
Image source: Getty Images.
What is Terra?
Terra is the ninth-biggest cryptocurrency in the world by market cap and the only one in the top 10 that has gained in value this year, up 10% through April 8.
Terra is different from Bitcoin, whose supporters think of it as a form of digital gold, or Ethereum, which is best known for serving as currency to buy and sell NFTs, valuable in the metaverse but mostly frivolous in the real world.
Terra, on the other hand, may have more real-world utility than any other investable cryptocurrency today. That's because Terra's ecosystem is made up of stablecoins, whose value is tied to fiat currencies, and Luna, its native token. By offering stablecoins, Terra solves the biggest problem with Bitcoin: utility. Because Bitcoin's value is so volatile, it's not a good store of value or a medium of exchange, and it's unrealistic for such a volatile currency to displace the dollar.
The UST stablecoin, Terra's dollar stablecoin, solves that problem, but the existence of Luna also makes Terra valuable to investors because its value moves and has gained roughly 10,000% since early 2021. Luna is used to stabilize the price of the Terra stablecoins. Terra miners burn or create Luna tokens to keep the price of stablecoins pegged to the currencies they track. Demand for Terra stablecoins increases the value of Luna to keep the price stable since tokens are burned as demand for UST goes up. Therefore, demand for Terra stablecoins lifts the value of Luna.
Terra is based in South Korea and has gained significant traction in that market. Early in its history, it attracted the Terra Alliance, a group of 15 large e-commerce companies in Asia that handles $25 billion in payments annually and has 45 million users. In other words, Terra has already built institutional buy-in for its payment platform in a way that no other cryptocurrency has, along with its combination of a stablecoin and its fluctuating native token.
A unique cryptocurrency asset
Terra has the ability to do what many cryptocurrencies aspire to do but can't -- be a functioning payment system and attract adoption by using Luna as a reward.
The coin appears to be picking up momentum. Not only is its value up more than 500%, bringing it to a market cap of $32 billion, but the token also recently passed Ethereum to become the second-most staked cryptocurrency behind Solana.
If you missed out on the Ethereum rally last year, take a closer look at Terra. Even as much of the cryptocurrency sector is struggling, Terra has the potential to explode by offering real utility.
