Bitcoin (BTC) price seems to have faked investors by rising to $ 42,000 last week, and while the digital asset is struggling to hold above $ 38,000, altcoins with strong fundamentals and real world applications are gaining traction.
Terra (LUNA), a blockchain protocol that supports the fiat-linked TerraUSD (UST) stablecoin, is one such project that has managed to buck Bitcoin’s downtrend and climb higher since the beginning of August
Data from Cointelegraph Markets Pro and TradingView show that LUNA’s price rose 162% from a low of $ 5.53 on July 20 to an intraday high of $ 14.51 on August 3, as the 24- Hourly trading volume increased from $ 137 million to $ 774 million.
Three reasons for the increased interest are LUNA’s rapidly growing ecosystem, the addition of a packaged form of Ether (ETH) to the Anchor Protocol that brings ether staking rewards to the Terra ecosystem, and the protocol’s tokenomics that contribute to this , the circulatory supply with LUNA and UST. to control .
Ecosystem growth attracts new participants
One of the clearest signs of acceptance of the Terra ecosystem is the rapidly growing list of partners and projects launched on the Terra blockchain.
The growing ecosystem provides access to some of the hottest sectors in cryptocurrency, including decentralized finance (DeFi) and non-fungible tokens (NFT), as well as bridges to other blockchain networks like Ethereum and Solana. The blockchain also supports numerous retail and payment protocols that allow token holders to use LUNA and UST for daily purchases.
Terra currently offers stablecoin support for 17 fiat currencies, including the US dollar, euro, and Canadian dollar, and plans to expand that list as the ecosystem grows.
Related: New study shows high demand for payments in cryptocurrency
The anchor protocol voted to add ether as collateral
A second reason for the bullish price growth at LUNA is the ongoing vote on the anchor protocol to add packaged ethers to the platform to mint UST.
A proposal to list bETH (wrapped stETH on Terra) as security for @anchor_protocol has been submitted️
This allows users to borrow UST against staked ETH collateral and earn liquidity mining rewards with the secured lending of Anchor. Https://t.co/ThQrW9PGyc pic.twitter.com/C1DGLhqQZL
– Lido (@LidoFinance) August 2, 2021
The integration is made possible through a partnership with Lido, a staking protocol for Ethereum and Terra that enables Stkern to receive liquid stETH (Staked Ethereum) and bLUNA (bonded LUNA) tokens.
Should the vote go through, Ether will be the first collateral option to bring in staking rewards from outside the Terra ecosystem, and this is expected to take the overall value of the log to a new all-time high.
LUNA burns as a dealer arbitrage UST
A third reason for the surge in demand for LUNA relates to the tokenomics of the protocol and the use of LUNA to mint UST.
In order to mint new VAT, a corresponding amount of LUNA must be burned, which affects the offer and price of LUNA.
As established platforms like Mirror Protocol grow and require more UST to boot the platform and new protocols are introduced on the Terra network, the increased demand has the potential to trigger price gains for LUNA and UST.
A higher demand for UST usually drives the price above USD 1 and this leads to arbitrage opportunities for token holders who can buy USD 1 from LUNA on the exchange and burn it for 1 UST via Terra Station, although the price of UST is currently 1 , Can be 10 USD.
This mechanism is how new USTs come out and also ensures that the protocol keeps its price fix at $ 1.
Last 7 days $ Luna in dollar value was burned
Compared to the current price,
In just one week, $ 41.95 million worth of Luna was burned.
Imagine what happens when all project buildings go live. $ bEth is about to go live on @anchor_protocol. $ Anc
– Simon.! (@ Sim0ndv) August 2, 2021
As can be seen in the tweet above, the circulating supply of LUNA decreased when new UST were minted last week, which had a positive impact on the LUNA price.
The addition of Ether as a collateral option, combined with a growing field of stablecoin offerings and new protocols being rolled out on the network, all have the potential to further increase the LUNA price.
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