Over the past 24 hours, Luna has popped more than 18% to over US$90. Generally, the crypto market is enjoying a green day with Bitcoin and Ethereum seeing their coin prices pop too, but only 5% and 4% respectively.
Luna’s surge comes as Terra’s TerraUSD stablecoin (UST) has become the third-largest stablecoin on the market, surpassing Binance USD (BUSD), despite UST trading volume only being one-fifth of BUSD.
Over the past 30 days, UST’s market cap has risen 15% to US$17.6 billion, placing it ahead of BUSD’s US$17.3 billion market cap.
UST had a circulating supply of 13.2 million coins back in November 2021. Its supply has since increased by 132,504%.
Terra has recently been garnering attention as co-founder Do Kwon said the project will accumulate $10 billion worth of Bitcoin (BTC) to add to its reserves.
The Anchor Protocol, built on Terra, is praised for its sustainability. Anchor currently pays its depositors up to 20% yield from lending UST to borrowers, in addition to staking rewards on their collateral. For every new UST created, US$1 worth of LUNA is burned on the Terra blockchain.
However, concerns over the rate’s sustainability have surfaced, after Anchor’s community noticed the protocol was burning its yield reserves at a faster speed to maintain the high yield.
A drop in rate will prompt a drop in UST demand, which means that the stablecoin’s ability to maintain its peg could be at risk. With the new proposal, the protocol’s payout rate change will be capped at 1.5%. Payout rates would increase by 1.5% if yield reserves increase and decrease by 1.5% if yield reserves fall by 5%.