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Terra (LUNA) Plunges While Crypto Market Remains in Limbo

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Fri, 01/28/2022 - 18:52
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Alex Dovbnya
Concerns surrounding the sustainability of the Anchor protocol are exerting selling pressure on Terra (LUNA)
Terra (LUNA) Plunges While Crypto Market Remains in Limbo
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The price of Terra (LUNA) is down over 16% over the last 24 hours, according to data provided by CoinMarketCap.

It is currently the worst-performing cryptocurrency among the top 100 coins by market cap. Bitcoin and Ethereum are flatlining at press time. Binance Coin (BNB) is up nearly 5%.    

LUNA is now down 52.25% from its all-time high of $103.34 that was recorded on Dec. 27.

Related
Binance Lists Terra-Based Anchor Protocol, ANC Price Spikes

Anchor’s depleting reserves

The significant drop comes amid growing concerns over the sustainability of Anchor, a lending and borrowing project on top of Terra. The protocol’s yield reserve recently dropped to $35 billion UST, shrinking by 50% in roughly one month. At this rate, the reserves will be completely depleted in several weeks, which would be disastrous for the Terra ecosystem. Anchor has $7.32 billion in total value locked, which makes it the seventh biggest DeFi protocol overall.    
    
Anchor offers a highly compelling stable annual percentage rate of 19.5%, but some critics argue that it might not be sustainable.   

Do Kwon, co-founder of Terraform Labs, recently tweeted that he was willing to subsidize the yield reserve in order to assuage investors’ concerns. He has hinted that he’s willing to inject up to $300 million, which could be a short-term solution.          

The sell-off has pushed the TerraUST (UST) stablecoin slightly off its peg.

Recently, UST surpassed Dai (DAI) by market capitalization, vying to become one of the leading stablecoins.

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About the author

Alex Dovbnya (aka AlexMorris) is a cryptocurrency expert, trader and journalist with extensive experience of covering everything related to the burgeoning industry — from price analysis to Blockchain disruption. Alex authored more than 1,000 stories for U.Today, CryptoComes and other fintech media outlets. He’s particularly interested in regulatory trends around the globe that are shaping the future of digital assets, can be contacted at alex.dovbnya@u.today.