LUNA, the native token of DeFi network Terra, surged to over $100 on Friday to lead a “Santa rally” in crypto markets. Total value locked in Terra has upped 55% over the past week, with a spike in on-chain activity. Some experts suggest DeFi applications like Anchor allure investors to Terra.
Traders took advance of Thursday’s 10% decline to $85 to bring LUNA back to its previous high of $96 in early Asian hours. Then an announcement by crypto exchange Binance that it will list UST, a stablecoin issued on the Terra network, pushed LUNA above $100. However, the price met resistance at that level and was down 5 cents at press time.
Rising prices caused the total value locked (TVL) in Terra’s decentralized finance (DeFi) protocols to cross the $21 billion mark, data from analytics tool DeFi Llama showed, making it the largest DeFi ecosystem after Ethereum. The figure has grown by almost $3 billion from Wednesday’s $18 billion level.
Of the total, over $9 billion is locked on Anchor, a stablecoin-based yield-generating application. For TerraSwap, a decentralized exchange built with Terra smart contracts, TVL jumped 81% to over $2 billion compared to last week.
DeFi protocols rely on smart contracts instead of middlemen to provide financial services such as lending, borrowing, and trading.
The value is split among 13 protocols or over $1.6 billion per protocol on average. That compares with $73 million per protocol on Binance Smart Chain, the third-largest DeFi ecosystem, with $17 billion locked on 232 protocols.
Some experts suggest DeFi applications like Anchor allure investors to Terra.
“A 20% APY [annual percentage yield] on UST deposits through the Anchor Protocol is very appealing because capital flows from price-volatile assets to more risk-averse yield-bearing positions,” Marvin Steinberg, the founder of investment firm Steinberg Invest, said in a Telegram message with CoinDesk.
LUNA’s price increase is part of a broader multimonth rally, one buoyed by November′s changes to its token mechanisms – such as a” burn” feature that periodically decreases supply – and increased activity on DeFi applications built on Terra. That’s propelled LUNA to become the ninth-largest cryptocurrency, with a market capitalization of $36 billion.
The Terra blockchain launched in January 2018 and uses fiat-pegged stablecoins to run its payments system. Its native LUNA token is then used to stabilize the price of the protocol’s algorithmically-backed TerraUSD stablecoin, UST. In addition, according to its whitepaper, LUNA holders can submit and vote on governance proposals of their own.