The crypto market is volatile due to the ongoing armed conflict between Russia and Ukraine, but Terra’s LUNA token has surged by nearly 80% in the last seven days. At present, the token is trading at ₹7,200, up from ₹4,150 last Tuesday, 22 February.
Terra is a blockchain e-commerce platform that uses fiat-pegged stablecoins like TerraUSD to enable stable and speedy cross-border payments. On the other hand, it relies on its utility and staking coin, LUNA, as a volatility absorption mechanism to support its stablecoins.
The recent gains follow last Wednesday’s announcement that the platform will be raising $1 billion to establish a Bitcoin-denominated forex reserve for TerraUSD (UST), its largest stablecoin. The introduction of Bitcoin reserves could be a game-changer as far as reducing the LUNA’s volatility is concerned, if the recent developments are any indication.
Terra’s Silent March to the Top 10
LUNA’s performance has been one of the best among cryptos lately. In the last 24 hours alone, the token has gained by more than 20%. It is currently short of reaching its all-time high of ₹8,100 (which it reached in December 2021) by only 13%.
With a total market capitalization of over $34 billion (nearly ₹2,55,000 crores), Terra has emerged as the seventh-largest crypto surpassing Cardano (ADA) and Solana (SOL).
LUNA’s steady and quiet rise into the top 10, since its launch in 2018, can be attributed to several reasons:
- Ethereum Killer: Terra has emerged as a serious competitor to Ethereum in the Decentralized Finance (DeFi) ecosystem. As many as 13 DeFi protocols have been built on top of Terra so far, within a short span of time.
- LFG and RoboHero: The creation of the Luna Formation Guard (LFG), a non-profit organization to facilitate the growth of the Terra ecosystem, and the launch of RoboHero, a metaverse game based on LUNA tokens, have both propelled Terra’s price rally.
- Burn mechanism: Burning (which is crypto code for ‘destroying’) LUNA tokens from the community pool periodically is a strategy the company uses to create scarcity and boost its price.
- Market conditions: Experts believe the present market conditions are stablecoin-friendly, adding to Terra’s list of contributors.
Despite the price rush, experts believe Terra has a lot more potential and could soon enter the top five cryptos. The growing demand for stablecoins combined with increasing metaverse popularity could play out in favor of Terra.
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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