Crypto

Terra Eclipses All-Time High Thanks to Inflows

Terra Eclipses All-Time High Thanks to Inflows

If you’re a stranger to the world of crypto, you might be surprised to know that there’s more to blockchain than Bitcoin and Ethereum. The two largest blockchains are valued at over $1.3 trillion – or more than 60% of crypto’s global market capitalization. 

However, the latest crypto bull run has brought about the promise of new blockchains which could vouch for a place in crypto royalty. In September 2021, we wrote about a few of these new kids on the crypto block for the Front Blog. Though these names have all risen since we penned that feature, one name has shined especially bright as of late: Terra. Most of its dramatic growth can be credited to Decentralized Finance (DeFi) inflows. However, a unique campaign by the chain’s founder might help explain the rest of it.

Surprised to find more crypto than Bitcoin and Ethereum? Check out the new kids on the crypto blog, Cardano Solana and Polygon. 

Terra [$LUNA] is a chain for stablecoins – which are cryptocurrencies pegged to the value of a currency. Terra currently offers three stablecoins, which are pegged to the respective currencies of South Korea, Mongolia, and the United States. However, most of the interest around Terra can be ascribed to the newfound popularity of its TerraUSD (UST) stablecoin, which became the largest “decentralized stablecoin” late last year.

Why is there now more than $16.5 billion worth of UST in circulation?

Well, mostly because of a Terra-based application called Anchor Protocol, which offers super high-yield interest on UST deposits. As of this writing, Anchor offers 19.42% APY on deposits – which has been a sufficient enough incentive for droves of DeFi maximalists to bring their money to Anchor despite a multiplicity of risks.

Among them are the fact that $UST is not backed by anything – it uses code to maintain its $1 peg – and Anchor’s rates or security could be compromised (as has happened with plenty of high-profile, multi-billion dollar projects in DeFi and crypto.)

Since the start of the year, the amount of money pooled in Anchor on Terra has nearly doubled (from $8.65 billion to $15.3 billion.) Those inflows have helped balloon Terra’s Total Value Locked metric, which is a measure of all the money pooled/staked on a blockchain, to over $20 billion. That has made Terra the second largest chain on TVL according to DeFi Llama.

On top of the inflows and newfound interest in Terra (and Anchor) is news that Terra will use Bitcoin to help back Terra’s stablecoins, and specifically UST. Terraform Labs CEO Do Kwon says Terra will aim to purchase $10 billion worth of Bitcoin, which would make the chain the second-largest holder of the world’s largest cryptocurrency.

When you bundle all these newsy factors together, it can help to explain some of Terra’s growth – and its new highs. However, it also adds some color to moves taking place in the broader crypto ecosystem, too. 

Those new highs might come with heightened risk, though: a single entity owning billions of dollars worth of Bitcoin might not seem significant, but consider – if a single buyer helps push crypto markets higher, they certainly have the propensity to disrupt or crash them too.

Coinbase & Robinhood in one place.

Download Front