LUNA has done it again. On Wednesday, March 30, the token set a new all-time high at $110. LUNA has now increased by almost 450 percent compared to the previous year. Only Solana (SOL) has outperformed among the top ten cryptocurrencies. There are several reasons for the enormous increase in value. The Terra network is one of the most important hubs in the DeFi market, has built up an ecosystem full of decentralized applications – and is also leaving its mark on the Bitcoin network.
What is Terra (LUNA) and how does it work?
Terra is an algorithmically secured stablecoin network. Instead of fiat reserves, the most common model of fiat-pegged cryptocurrencies that also uses Tether (USDT), the LUNA token stabilizes the stablecoins exchange rate. Among them, the US dollar-pegged TerraUSD (UST) is by far the largest with a market cap of $16 billion.
Terra stablecoins have an elastic, i.e. fluctuating, circulation quantity that is determined by demand. If the demand for one of the stablecoins increases, the supply increases, if the demand decreases, the amount in circulation also decreases. Price stability is created by automated buying and selling algorithms with LUNA tokens, which adjust the expanded or shrunken supply with demand. More about this here.
Second largest DeFi player
With its hitherto fail-safe exchange rate system, Terra has become one of the mainstays in the DeFi ecosystem. Terra is now the second largest blockchain after Ethereum in terms of Total Value Locked, i.e. the equivalent of all the tokens involved in DeFi applications. According to Terra, the TVL is more than 28 billion US dollars defillama. That’s still miles away from Ethereum’s $124 billion. For this, Terra has the biggest Ethereum pursuer for a long time, the binance Smart Chain (BSC), well lapped by more than twice the TVL.
98 projects are currently based on Terra. These include the popular savings protocol Anchor, which enables returns on Terra deposits. Or Mirror, which enables trading in synthetic assets, i.e. tokens that are the underlying value of stocks or commodities.
A new bitcoin standard?
Last but not least, Terra also plays an increasingly important role in the Bitcoin ecosystem. To hedge the stablecoin UST, Terra is gradually building up $10 billion in bitcoin reserves. “UST with $10 billion in BTC reserves will usher in a new monetary era of the Bitcoin standard,” Terraform Labs CEO and founder Do Kwon tweeted.
No small house number. This would make Terra the largest Bitcoin holder in the world after Bitcoin inventor Satoshi Nakamoto. Already, Terra has loud Bitinfocharts over 30,727 bitcoins. Only MicroStrategy (125,051 Bitcoin), Tesla (42,902 Bitcoin) and Satoshi are ahead of them.
Do you want to buy cryptocurrencies?
eToro offers investors, from novices to experts, a comprehensive crypto trading experience on a powerful yet easy-to-use platform.*