LUNA is growing insanely: is this growth sustainable?
3 min readCryptocurrency LUNA is a native token of Terra blockchain. At the beginning of 2021, the token price was $ 0.83. ATH achieved the project recently, on March 9, 2022, making the price of cryptocurrency gigantic 12,596 percent appreciation. Despite this gain, the token still shows strength.
Is this growth healthy and sustainable in the long run, or does a major correction await us in the near future? We will look at this in today’s article.
Growth of cryptocurrency LUNA
The LUNA token has grown significantly in recent months. Thanks to massive investments and the popularization of blockchain, the Terra project has become one of them among the top 10 cryptocurrencies with the largest capitalization on the market.
Despite the corrections that we can commonly see on the chart, LUNA quickly returned to the uptrend and even today it is not far from ATH. This raises questions about how far growth can continue.
The first voices are beginning to emerge, warning the sustainability of the whole project and the growth itself. Anonymous businessman named Sensei Algod bet $ 1 million that LUNA would trade for less than $ 88 by March 14, 2023. The bets were caught by CEO and founder of Terraform Labs, To Kwon who also bet 1 million, but quite the opposite: According to him, LUNA will definitely trade higher than 88 USD.
Daniel Santos CEO of Woonkly, a decentralized financial (DeFi) social media network, is convinced that the bets point to the growing popularity of the LUNA token.
“The more popular the project, the more fans and non-partisans it has. One of the non-losers bet on LUNU and Terra’s founder accepted the bet, and why not – it’s so easy, “he told to Cointelegraph.
Sustainability of the Anchor Protocol
Anchor Protocol (ANC), a decentralized Terra lending ecosystem that currently allows investors holding TerraUSD – the original stablecoin platform in the United States – get an annual percentage return (APY) of almost 20%. Theoretically, such high interest rates are made possible by the fact that the fixedcoins invested are pooled and lent to the borrower to accrue interest.
This naturally begs the question, what if there are more people who put their coins into Anchor than borrow from it? This is already happening. The protocol’s crypto treasury shrunk from $ 70 million to just over $ 6.50 million between late December and mid-February.
Jack Tao CEO of the Phemex Crypto Exchange, told Cointelegraph:
“We must note that the crypto market is very volatile and such high yields are certainly difficult to maintain in the long run, as many of them can be inflated for speculation. Now that there are more USTs than ever before, there are already critics who believe that LUNA will not be able to maintain its price unless Terra changes its current model.“
Lim also believes that the current APR of Achor is quite unsustainable. He pointed out that the protocol works just like any other money market. If the revenue reserve is exhausted, the APR will be adjusted to a sustainable amount, around 12-15% per year, which is quite good for stablecoins.
