Monday, January 24, 2022

DeFi value on Terra soars to $ 21 billion as LUNA surpasses $ 100

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LUNA, the native token of the Terra decentralized payments network, rose to over $ 100 in European hours on Friday to lead a ‘Santa Claus Rally‘in the crypto markets.

Traders advanced Thursday’s 10% drop to $ 85 to bring LUNA back to its previous high of $ 96 in the early Asian hours. Then a announcement by Binance crypto-exchange that it will list UST, a stable currency issued on the Terra network, pushed LUNA above $ 100. Price has encountered resistance at this level and was down 5 cents at the time of release.

LUNA tokens have seen a one month uptrend.  (TradingView)

The price increase resulted in the total blocked value (TVL) in decentralized finance (DeFi) on Terra to cross the $ 21 billion mark, The data analysis tool DeFi Llama showed, making it the largest DeFi ecosystem after Ethereum. The figure is up nearly $ 3 billion from Wednesday’s level of $ 18 billion.

Of the total, more than $ 9 billion is stuck on Anchor, a yield-generating app based on stablecoins. For TerraSwap, a decentralized exchange built with Terra smart contracts, TVL has jumped 81% to over $ 2 billion from last week.

The best DeFi protocols on Terra by TVL.  (DeFI Lama)

DeFi protocols rely on smart contracts rather than intermediaries to deliver financial services like lending, borrowing, and trading.

The value is spread across 13 protocols, or over $ 1.6 billion per protocol on average. That compares to $ 73 million per protocol on Binance Smart Chain, the third-largest DeFi ecosystem, which has $ 17 billion locked in on 232 protocols.

Some say apps like Anchor add to Terra’s appeal to investors. “An APY of 20% [annual percentage yield] on UST deposits via the Anchor Protocol is very attractive because capital flows from volatile-priced assets to more risk-averse, yield-bearing positions, ”said Marvin Steinberg, founder of investment firm Steinberg Invest, in a Telegram message with CoinDesk.

LUNA’s price increase is part of a larger multi-month rally, supported by November changes to its token mechanisms, such as a “burn” function which periodically decreases the offer – and increases the activity on decentralized finance applications (DeFi) built on Terra. This propelled LUNA to become the ninth largest cryptocurrency, with a market cap of $ 36 billion.


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