The greatest crypto community experiment is upon us

I know I have talked about Terra quite frequently here lately. But bear with me, it will all be over soon ... or is it just beginning?

Thursday marks the new beginning for Terra's new chain as a snapshot will be taken of all the holders on record. They will be deemed eligible to receive new LUNA tokens.

You can think of it as a dividend if you want, except the "shares" each investor receives are actually tokens in an entirely new chain.

I've already covered the dynamics of how we got here and the plan for the new chain in my prior posts, but for paid subscribers only I wanted to highlight what it could mean for price action as this experiment unfolds.

As anyone with experience with normal stocks and dividends will tell you, anytime there is a "record date" for existing shareholders to be marked eligible to receive dividends, typically shares rise a bit up until that moment. Afterwards, once the upside of earning a dividend to justify holding a stock passes, shares tend to give up any of the gains leading up to the record date.

What's a bit different here, however, is that the shares and the dividend aren't the same. So it's not to be seen exactly as a dividend. After the new chain begins, it will adopt the LUNA ticker, and tokens from the old chain will become LUNC (Luna Classic.) Also, keep in mind that only 30% of the new LUNA float that's airdropped to holders on record will be unlocked at genesis. There is still a lot that will be locked up and set to vest over two years. As such, I don't think there will be a lot of pressure on people to dump LUNA as soon as they receive their airdrops.

In my own experience, it's generally best to sell airdrops about a week or two after they are received. A big caveat, though, is that like newly minted shares in an IPO, they are a bit beholden to the whims of the broader market. If things are tanking, an untested asset is likely to get spanked even harder. That could trigger a panic dump for LUNA before it even has legs to stand on. But then again, if the community really does believe that this might work, it could gain some steam in an upswing.

Ok... back to how to play this ahead of the record date.

For Terra's record date (called a snapshot in crypto parlance) holders will be recorded when block 7790000 gets added to the old Terra chain. By my estimate that looks like it will fall around 12pm EST on Thursday. As such, I'd expect there to be some last minute buying pressure for both UST and LUNA. In fact, UST has already been creeping up from $0.03 earlier this week to $0.11 on Wednesday night.

UST has seen some bidding this week. (Source: Coinbase)

Technically, on the old Terra chain, you'd expect LUNA to also appreciate in price when UST moves closer to its dollar peg. I suspect there might be some speculative buying around anyone hopeful that UST is rising more than it has since it crashed. This could fuel a bit of an anti-death spiral -- or, the exact opposite of what brought LUNA down in the first place.

But whatever kind of rally materializes, I'd suspect it to be short-lived. There are still a lot of UST holders who will be looking to dump to salvage any of what tokens they have left.

So be careful in trading anything, but hopefully this at least prepares you a bit for some of the swings we might see. If you are so bold, playing the LUNA futures contract would be one way to add margin to a bet on quick short-term moves (it's still available on KuCoin.) Just be prepared to get out before all of the people who are much quicker at this than you execute their strategies as well. Remember, "Pigs get fat. Hogs get slaughtered."

I'll be adding some other ways to play lessons we've learned from Terra's rise and collapse in future premium subscriber posts. Thanks again for your continued support!

Disclosure: The author owns BTC, ETH, UST, and LUNA. As always, consider financial objectives and risks carefully before investing. Nothing above should be considered financial advice.