UST Stablecoin Demand, DeFi Incentives Drive Terra’s LUNA to New All-Time High

Following a network upgrade in October, it’s the second time this month LUNA has logged record highs.

AccessTimeIconNov 30, 2021 at 4:42 p.m. UTC
Updated Nov 30, 2021 at 5:19 p.m. UTC

Muyao was a markets reporter at CoinDesk.

LUNA, the native token of the Terra blockchain, hit a record high Tuesday, as demand for the network’s UST stablecoin surges and users chase multiple incentive programs.

This is the second time in November that LUNA has logged a new all-time high. At press time, LUNA was changing hands at $57.63, up 11% in the past 24 hours, according to data from Messari.

LUNA is part of an algorithmic balancing system that helps stablecoins running on the Terra blockchain maintain parity with fiat currencies. One of the major developments from the network’s Columbus-5 upgrade in October is a new design for keeping stablecoins pegged to their fiat value: whenever UST is minted, LUNA with the same amount of value is burned.

According to data from Terra Analytics, more than 92 million LUNA tokens have been burned since the Columbus-5 upgrade went into effect at the end of September.

“LUNA’s price is a function of UST demand,” said Jeremy Ong, vice president of business operations at crypto research firm Delphi Digital. “As UST demand goes up, LUNA’s price also goes up.”

CoinDesk - Unknown

LUNA's monthly price chart. (Messari)

Not just UST

But Ong said a number of incentive programs from Terra-based decentralized finance (DeFi) platforms are also a factor.

Abracadabra.Money, a multi-chain decentralized lending platform, launched a yield-earning product for non-interest-bearing tokens called Degenbox earlier this month. The product first allowed users to deposit UST as collateral in order to receive yields.

Another shot in the arm for LUNA’s price may be a so-called lockdrop event from Astroport, a decentralized exchange protocol on Terra, Ong said.

Astroport will launch the lockdrop event on Dec. 6, allowing users to lock their LUNA tokens in exchange for a “drop” of the protocol’s own not-live-yet ASTRO tokens, according to the project’s Medium page.

“People are trying to get more LUNA for Astroport’s lockdrop,” Ong said.

Terra is the fifth-largest smart contract platform by total value locked (TVL) at $11.87 billion, according to data from DeFi Llama. TVL is the total value of the cryptocurrency committed to DeFi protocols that are built on a given blockchain. Ethereum remains the DeFi market leader with $182 billion in TVL, per DeFi Llama.


Read more about

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Muyao was a markets reporter at CoinDesk.

CoinDesk - Unknown

Muyao was a markets reporter at CoinDesk.

Trending

1
CoinDesk - Unknown
Bitstamp Inactivity Fee Canceled After Customer Response

The crypto exchange had said it would be charging small, non-active accounts 10 euros per month.

CoinDesk - Unknown
2
CoinDesk - Unknown
Crypto News Roundup for July 6, 2022

With crypto markets trading in the green and a look at crypto job satisfaction just as the crypto winter began, CoinDesk’s “Markets Daily” is back with the latest news roundup.

CoinDesk - Unknown
3
CoinDesk - Unknown
Genesis Confirms Exposure to Three Arrows Capital

Digital Currency Group, the crypto conglomerate that owns Genesis, is assuming some of the liabilities.

CoinDesk - Unknown
4
CoinDesk - Unknown
Ethereum's Sepolia Testnet Successfully Switches to Proof-of-Stake

The Sepolia proof-of-work chain merged with its proof-of-stake chain on Wednesday, taking Ethereum one step closer to its own Merge moment.

CoinDesk - Unknown