After the moment of uncertainty in January, LUNA resumed the bullish movement that it had initiated in late autumn. The main cause is obviously the refloating of the Anchor reserve, which allows Terra to be the flagship blockchain to ensure high returns in stablecoins. However, the arrival of Mars Protocol has also revitalized this blockchain to make it one of the flagship DeFi networks at the start of the year.
- The Revival of the Anchor Protocol
- Why is there so much hype around Mars Protocol ?
- What is the outlook for the LUNA price?
The Return Of The Anchor Protocol
The Terra blockchain owes much of its success to the Anchor protocol. This lending site allows you to deposit UST for a return of 19%. This unimaginable rate in traditional finance, however, had a delicate counterpart.
Indeed, with the downward trend of the market, more and more investors preferred to accumulate stablecoins that they could optimize on this protocol. Unfortunately, the influx was such that the reserves of the protocols quickly melted away. At the end of January, there were only a few weeks left before the end of this treasure. This would undoubtedly have damaged both the Terra blockchain and the stability of the UST. The governance of the blockchain has therefore decided to return 450 million dollars to the reserves. If the amount deposited on Anchor does not increase, the reserves should last another year with this contribution.
It may seem like a bandage that doesn’t cure the hemorrhage. In reality, it is time to transform the economy of Anchor in order to give it viability. This recovery, in addition to the listing on Binance, allowed the Anchor token to regain an uptrend. After collapsing to almost a dollar in early February at the time of the panic over its future, the ANC token has gradually returned to a price close to its all-time high. The price then underwent a correction to reach 3.82 dollars today.
Terra Blockchain: A DeFi Star
Paradoxically, the Terra blockchain is one of the most important in terms of TVL (Total Value Locked), more precisely the second after Ethereum. However, it has very few protocols unlike its close competitors. Anchor represents half of the TVL on Terra.
Therefore, each new protocol is an important moment in the blockchain. They are generally very serious and strengthen the ecosystem. Most of them are sites for lending, farming with leverage, or synthetic tokens (for example Mirror Protocol which tokenizes stock values).
After Astroport at the end of 2021, it’s Mars Protocol’s turn to be the new hype on Terra. This lending site proposed a launch in several phases. The first week, it was possible to lock UST for a more or less long period. In exchange, we received MARS, the protocol token. This lock corresponds to a bet on the price of the token. Indeed, we could not know if what we would receive would be higher than what we would have earned by leaving our UST as much time on Anchor. But this also aims to retain users on this protocol. By receiving their token before the end of the lock period, they can use them to optimize their position. It was this first week that especially attracted a lot of investors and now the site is in 8th position in terms of TVL.
Why Does LUNA Superform Bitcoin?
All its new features have given new dynamism to the Terra blockchain. This benefited LUNA which regained a bullish outlook. To understand the evolution of its course, we must also not forget its link with the UST. Unlike other stablecoins, UST is directly dependent on LUNA. For each UST created, the equivalent in LUNA is destroyed and vice versa. Therefore, the greater the need for UST to participate in its DeFi protocols, the more the number of LUNAs decreases. It is for this reason that paradoxically the LUNA goes against the grain of the crypto market.
Despite a first ATH in the spring of 2021, it was not until the end of autumn that the LUNA had its moment of glory. After a first ATH at 99 dollars on December 26, LUNA fell back to 47 dollars at the beginning of January, precisely in the moments of uncertainty of the Anchor reserve. When these were lifted, the ascent could resume. On March 9, LUNA hit a new all-time high at nearly $104, outperforming the wider market.
Even if all the problems are not solved in the ecosystem of Terra, in particular on the level of the durability of the reserves of Anchor and the stability of the UST, the confidence of the investors has returned. Terra consolidates its position as the second DeFi blockchain, now far behind the BNB Chain.