2 years ago
Terra’s LUNA (LUNA) token roseate to arsenic precocious arsenic $104.58 connected Wednesday morning, topping a erstwhile all-time grounds of $103.34 notched past December.
According to information from CoinMarketCap, LUNA was up 25% implicit the erstwhile 24 hours. As of property time, the token had pulled backmost a spot to $102. LUNA has present much than doubled successful terms since putting successful a 2022 debased of astir $44 successful precocious January. Its existent valuation conscionable shy of $38 cardinal makes it the sixth-largest cryptocurrency by marketplace cap.
LUNA’s caller milestone makes it an outlier among large-cap cryptocurrencies, with names similar Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), Binance (BNB), Avalanche (AVAX) and Solana (SOL) down 40-70% from all-time highs.
The LUNA/UST relationship
The gains for LUNA are apt acknowledgment to beardown request for sister token TerraUSD (UST), an algorithmic stablecoin pegged to the US dollar.
UST maintains its dollar peg by burning oregon issuing LUNA tokens. When the worth of UST drops beneath $1 (for example, to $0.98), holders of UST tin person UST to $1 worthy of LUNA (therefore, arbitrageurs tin pouch the $0.02 difference).
Conversely, if - arsenic appears to beryllium occurring present - request for UST drives the terms of the token implicit $1, users tin mint further UST (driving the terms of UST backmost down to $1) by burning the dollar-equivalent magnitude of LUNA. This burning of LUNA tokens to make UST drives up the terms of LUNA.
Anchor Protocol driving UST demand
Behind that strong request is Terra’s Anchor Protocol, a decentralized concern (DeFi) level advertizing an annualized percent output (APY) of astir 20% connected Terra stablecoins. That precocious output compared to different stablecoin lending protocols has attracted an influx of superior into Terra successful caller weeks. The full worth locked (TVL) connected the level soared to $12.6 billion, making it the largest DeFi protocol by TVL successful the Terra ecosystem, according to information supplier DeFi Llama.
Anchor is presently paying retired a 19.46% APY for users that fastener up their UST successful the protocol. The Luna Foundation Guard (LFG) tweeted past Saturday that it was minting the “maximum amount” of UST to support up with demand.
In different tweet this morning, the LFG said it would pain the $4.2 cardinal of LUNA near successful its treasury to supply UST liquidity to the stablecoin decentralized speech Curve.
To adhd further tailwinds, Terra co-founder Do Kwon tweeted that the LFG is adding an further $418 cardinal successful reserves to its treasury, bringing its full to $1.5 billion.
The reserves could beryllium utilized to bargain LUNA tokens to person to UST, oregon to enactment up Anchor’s reserves to wage those sky-high yields to depositors. Either script would enactment upward unit connected the terms of LUNA.
DISCLOSURE
The person successful quality and accusation connected cryptocurrency, integer assets and the aboriginal of money, CoinDesk is simply a media outlet that strives for the highest journalistic standards and abides by a strict acceptable of editorial policies. CoinDesk is an autarkic operating subsidiary of Digital Currency Group, which invests successful cryptocurrencies and blockchain startups. As portion of their compensation, definite CoinDesk employees, including editorial employees, whitethorn person vulnerability to DCG equity successful the signifier of stock appreciation rights, which vest implicit a multi-year period. CoinDesk journalists are not allowed to acquisition banal outright successful DCG.
Tracy Wang is simply a elder newsman astatine CoinDesk. She owns BTC, ETH, MINA, ENS, assorted stablecoins, and immoderate NFTs.
Subscribe to First Mover, our regular newsletter astir markets.
By signing up, you volition person emails astir CoinDesk merchandise updates, events and selling and you hold to our terms of services and privacy policy.
English (US) 