LUNA, Terra’s network native token, continues to outperform its peers and has continued its upward trend this week, with the token’s price regaining more than 100% in three weeks.
Terra’s LUNA token climbed to $104.58 on Wednesday morning, breaking the previous all-time high of $103.34 set last December after a 15% intraday rise.
Terra rise in DeFi
Terra has recently seen a lot of success in the market for Decentralized Finance (DeFi). Terra surpassed Binance Smart Chain (BSC) to become the second largest DeFi blockchain on December 20, 2021, gaining significant market share.
In contrast to its competitors, which have seen their total value locked (TVL) decline in the last month, the second largest DeFi blockchain has experienced a 75 percent increase in market share.
While the price of LUNA has been skyrocketing and has reached an all-time high, the total value locked in the Terra blockchain network has also reached an all-time high, nearly reaching $29 billion for the first time ever, as the payment network continues to gain traction.
According to StakingRewards, the token also became the second-largest staked asset among all major cryptocurrencies in terms of total value staked, with a staked value of $29 billion at the time of the source’s publication.
Demand for UST fueling LUNA prices
Strong demand for Terra’s stablecoin UST is likely to have influenced a massive move for sister token LUNA, which is algorithmically burned to mint new UST, increasing demand for LUNA while decreasing supply.
On March 9, Arthur Cheong, founder of DeFiance Capital, revealed that the LUNA price rose because Terra’s native U.S. dollar-pegged token, TerraUSD, was able to grab at least $1 trillion or more in decentralized stablecoin market space (UST).
According to Smart Stake data, the quantity of UST coins reached over 1.4 billion on March 9, the highest amount to date. At the same time, the Terra protocol permanently removed 120 million LUNA coins from circulation, valued at over $12 billion at current rates.
The UST dollar peg is maintained by LUNA. The Terra protocol burns LUNA and mints new stablecoins if the stablecoin’s price increases above $1. Similarly, if the price of UST falls below $1, the value of LUNA drops as well due to a slowdown in the burning mechanism.
Technically, LUNA is in uncharted terrain and appears to be on the verge of entering a price discovery mode; yet, the fact that it is in an uncharted region implies that downside risk exists.
Although the war tensions between Russia and Ukraine appear to have subsided, the tragedy remains a huge cause of fear for the market, and it is uncertain which route it will follow.
Given the efforts being made to enhance the blockchain and make it more effective in processing transactions, LUNA should do well in the long run independent of macro market dynamics.