Terra (LUNA) has been on a roll, rising by more than 37.85% in the last 24-hours as the crypto market is trying to recover from a bearish trend. The token claimed victory over Polkadot (DOT) and Dogecoin (DOGE). The current market cap of the coin is 29.5 billion USD.
Why is Terra (LUNA) rising?
Terraform Labs, the firm behind the stablecoins’ platform Terra (LUNA), and its CEO, Do Kwon, is being investigated by the SEC. Regardless, the platform and its governance token are performing incredibly well. The ecosystem, including Anchor, Pylon, and Mirror Protocol, operates via stablecoins which is minted by the Terra platform.
Whenever stablecoins are minted, there is a huge drop in the supply of the token due to burning. Stablecoins are backed by assets which in this case is the Terra (LUNA) token. Over the past month, a huge quantity of LUNA has been burned. Recently, 88 million Luna from the community pool were burned after the approval of a proposal to create more UST, a stablecoin.
“Luna’s economics are built to be deflationary, and over the past month we’ve seen 100 million Luna tokens be burned, which removes them from supply forever,” said Hayden Hughes, CEO of Alpha Impact, a social-trading platform.
The chart above shows the bullish uptrend followed by the token since August. The volumes have been quite high as investors are attracted to the deflationary capabilities of the platform.
“Luna’s price dynamics are mostly a function of the demand for UST, and by extension, the demand for using UST across various applications and blockchains,” said Brian Curran, head of communications at Terraform Labs.
The weekly chart above shows that the year 2021 has been extremely bullish for the token, with prices rising from below $1 to an all-time high of nearly $78. The token has shown extremely bullish sentiment in the past and continues with the same.
Terra (LUNA) has also taken part in the metaverse rally, partnering with names like Summoner’s War. As per data from DeFiLlama, the Terra platform ranks third in terms of TVL or Total Volume Locked. The current TVL stands at 14.35b USD, which is just behind Binance’s 17.07b USD.
“Reduction in supply combined with the popularity of Luna staking (where staking participants get new tokens) has created a supply shock that has driven up the value,” added Hughes in his statement to Bloomberg.