Crypto intelligence firm IntoTheBlock is revealing the catalysts that pushed Ethereum (ETH) challenger Terra (LUNA) to new all-time highs.
Terra is a decentralized finance (DeFi) payment network that allows users to mint stablecoin Terra USD (UST) by burning its native asset LUNA.
UST holders have the option to deposit their Terra USD stacks to lending platform Anchor Protocol (ANC) and take advantage of its 19.5% annual percentage yield (APY).
The crypto insights firm says Terra’s economic setup has fueled the ascent of LUNA during times of market uncertainty.
“Key catalysts – LUNA’s recent rise has been fuelled by these main factors:
- A $1 billion fundraise from the Luna Foundation Guard (LFG) to build Bitcoin reserves to support UST – the Terra ecosystem’s stablecoin – peg to the dollar
- LFG replenishing the Anchor protocol’s yield reserve with $450 million, used to provide depositors with a rate of 19.5% on UST
- Increased demand for UST (mostly to obtain these high rates) has resulted in a vast amount of LUNA being burnt, effectively reducing its supply.”
IntoTheBlock also says that while Terra has seen immense growth, it may not be sustainable without a few key changes.
“[Is this] sustainable? The million-dollar question – Anchor has managed to support yields near 20% on UST by charging high borrowing rates (around 13% at the moment) and subsidizing the remainder through the yield reserve, which they just augmented.
There are also a few governance proposals aiming to make these yields more sustainable:
Limiting rates for large depositors, providing lower yields for those providing over $100,000 and $500,000
Introduction of a voting-escrowed ‘ve’ tokenomics for Anchor where depositors would require to lock their ANC tokens for veANC in order to boost their yield up to 20% APR.”
Terra is exchanging hands for $90.80 at time of writing, an 18% increase from its seven-day low of $76.76 and a staggering 89% increase from its 30-day low of $47.80.
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