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March 14, 2022

Here Are the Key Catalysts Pushing Ethereum Rival Terra (LUNA) to New All-Time Highs: Analytics Firm IntoTheBlock

By Daily Hodl Staff

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.

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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.

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“[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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Featured Image: Shutterstock/Bryan Vectorartist