Supply from stablecoin, UST, has more than doubled in the past nine days, reaching $6.4 billion. This puts the $2B coin behind the DAI, the stablecoin produced by the Maker protocol, as of November 18th.
Fans of the Terra ecosystem, which produces stablecoin UST, may need to contain their joy because the increase does not stem from user demand, but rather from a governance proposal.
BURN on LUNA
Here’s what happened: The governance voted to burn 88.68 million LUNA tokens, worth $3.5 billion at a price of $40.21 on November 18th. These LUNA tokens came from “rewards”, deposited in Earth’s treasury when users exchanged them for UST tokens when demand pushed the value of stablecoin to over $1.
Exchanges will continue for two weeks in total, as per the proposal.
As the demand for Earth’s 19 stablecoins increases, the price of those stablecoins increases. Terra provides a module that allows users to exchange LUNA for the desired price. Therefore, if demand raises the UST to $1.01, Terra provides a module that allows users to exchange the LUNA for UST at $1.00. Users can then sell UST on the open market for $1.01, arbitrating the stable currency up to a price of $1.00
When users made this exchange, LUNA accumulated in the treasury. An update called Columbus-5, sent out on September 30th, changed it so that LUNA is now burned, but still leaves the treasure with billions of LUNA dollars.
Now the question is what to do with all this UST. “Initially, the plan was signaled in prop 44 was to use $1 billion to initialize the ozone,” wrote Terra co-founder Do Kwon in the proposal to burn the 88.68 LUNA.
Ozone is an insurance protocol that has not yet been released, but will provide coverage for technical failures in the Terra DeFi ecosystem. Risk Harbor, risk market manager for decentralized finance along with AngelList co-founder Naval Ravikant, recently took over the helm of Ozone.
Rewards for Stakers
Another effect of LUNA being burned is that stake rewards should increase to more than 10%, as per Kwon’s proposal. This is because, according to the changes implemented in the Columbus-5 swap rates in Terra, like the LUNA to UST rates made in bulk now, go into a pool that rewards the stakers.
In fact, the staking rose to 7.94% per year. Almost doubling since Terra started trading LUNA for UST.
All in all, UST supply is heading towards the moon, although demand has not steered the trajectory. Still, with an insurance protocol underway and stake rewards increasing, things are looking up at Earth’s protocol.
Warning: The text presented in this column does not necessarily reflect the opinion of CriptoFácil.
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Terra Price Analysis: LUNA/USD is bearish for the next 24 hours
- Terra price analysis is bearish for the next 24 hours.
- The closest support level lies at 38.00.
- LUNA faces resistance at the $42.50
The LUNA price chart indicates that the company has broken down below the $40.00 crucial support level. The sellers had previously defended the mark several times, but they were overwhelmed by recent increases in selling activity across various markets.
The overall market entered a downward movement last week. You can see that in a clear way on a comparison of the LUNA and Terra charts, also featured below: Currently, the market is trading at $40.25, which corresponds to a 7% loss from this time one month ago. Of course, the price may return to higher levels judging from the indicators, but we can trade following our strategy based on candlestick charts and technical analysis.
LUNA/USD four-hour prixe analysis chart: What to expect
According to the Terra analysis, LUNA has been trapped in a holding pattern around the $42.50 price level. While the price moved up and down several times before attempting to break down the $40 mark and climb above it, neither one was successful, with the price instead oscillating. LUNA is likely to fall below a lower support level as volatility increases with the recent breakout.
Traders should anticipate a drop to around $37.50 and possibly lower soon, owing to an increase in market sales. The mid-term technical views and short-term indicators are both bearish, further cementing this prediction.
Terra Price Analysis: Conclusion
LUNA made a false breakout in the mid-term before entering a current bearish trend. The price is likely to continue with downwards movements for its next corrective cycle.
The nearest support level lies at $41.00, while the nearest resistance lies at $42.50. If the price breaks below $37.50, or even $34.50, we may see further drops to around $30.00, where LUNA may attempt to form a new temporary bottom before making another correction upwards.
Terra (LUNA) Price Poised For 65% Upswing Hitting $70! Here’s When
Terra Luna recovered dramatically in August, rising from roughly $5 to $37. Although the LUNA coin’s upward speed has slowed since September began, it is still on an upswing. With oscillations, this cryptocurrency has been steadily rising.
During the last two months, moving averages have helped provide support during pullbacks and push the highs higher. The crypto market has had a significant pullback this week, yet LUNA/USD remains optimistic.
Analyst Bullish on LUNA
According to a well-known cryptocurrency trader and expert, Smart Contracter, Terra, the Ethereum competitor will reach a new all-time high.
He says, Terra (LUNA), the native token of layer 1 (L1) blockchain, might increase by 66 percent from present levels and reach a new all-time high (ATH).
The trader mentions, L1 runs aren’t over yet and they’ve started branching out into a few others recently, with $luna being one of them. “ATH and $70 or so [definitely] on the table.”, He added.
the L1 runs aren't over yet imo, started branching off into some others lately with $luna being one. ATH and $70 or so defo on the table. pic.twitter.com/DtJ7zllotP— Bluntz (@SmartContracter) November 17, 2021
Layer 1 blockchains are decentralized networks with the ability to change protocol rules directly to increase capacity and speed.
At the time of writing, LUNA was trading at $42.67 up by 2.4% in the last 24 hours.
The governance token of decentralized financial platform Curve (CRV) is similarly ready for a “glorious” breakout, according to Smart Contracter, after trading in a limited range for most of the year when coupled with Bitcoin (CRV/BTC).
He notes that CRV/BTC has been basing for a year, and the longer the base, the higher in space it is. This break-out will be spectacular he adds.
Terra will burn 88.7 million LUNA tokens worth $4.5 billion
- Terra will burn almost 88.7 million LUNA tokens worth $4.5 billion.
- It will be burned and swapped for the stablecoin UST.
- This burn will prepare the altcoins structure for the Columbus 5 upgrade.
Terra, the algorithmic decentralized stablecoin project will burn $4.5 billion worth of its native coin LUNA from its community pool. The decision was taken through Terra’s on-chain governance system. According to their Twitter announcement, LUNA will be burned and swapped for UST, which is Terra’s native stablecoin.
The burn will take place on every 800 blocks generated by the smart-contract based project. With this burn, Terra is planning to ease the native coin into its new upgraded structure Columbus 5. The UST stablecoin generated from the burn will be reallocated and distributed to the community pool. There’s still no announcement as to what will be done with the reallocated UST.
Terra has stated that the burn will leave the community pool with 10 million LUNA tokens, which should be sufficient to meet the community demand. This massive burn will simplify the algorithmic altcoins rather complex economics and enhance its boost staking rewards.
LUNA prices are expected to go up
As with any cryptocurrency, large volumes of token burning usually results in a price hike. After the announcement on Terra’s official Twitter feed, LUNA’s market price has already started to go up. The altcoin is up by over 7% in the last 24 hours.
LUNA has already hit a new all-time high last week, after reaching $54.77, followed by a sharp decline in the $47 range. According to Terra’s governance proposals 133 and 134, the project will use LUNA to bootstrap its decentralized insurance system Ozone. But how much of it will be allocated to bootstrap Ozone will only be determined after the whole stockpile of 88.7 million tokens are burnt and swapped for UST.
The altcoin is currently trading at $50.98, inching towards its previous all-time high.