LUNA Holds Ground Over $90, Do-Kwon Hints At Factors Behind Rally

LUNA, Terra’s native cryptocurrency, remains on an upward trajectory. The cryptocurrency follows the general market sentiment and is one of the best performers in the crypto top 10.

Related Reading | Terra (LUNA) Surpasses Ethereum Becoming Second Most Staked Asset

This trend could continue in the short term, but some indicators point to caution. In the long term, the outlook seems clearer.

At the time of writing, Terra’s cryptocurrency trades at $94 with sideways movement in the last 24 hours and 6% profit in the past week.

Do Kwon, Terra Co-Founder has become one of the most popular individuals in the crypto space. Very active on social media platforms, Kwon recently presented one bullish factor for the long-term survival of LUNA and the Terra ecosystem.

According to Kwon, the crypto market will increase its demand for decentralized stablecoins, making Terra’s native stablecoin UST grow further. This stablecoin and LUNA operate with a burning mechanism.

Whenever the demand for UST increases, the mechanism burns LUNA to increase the stablecoin’s supply and vice versa.

Unlike competitors, such as Tether (USDT) and USD Coin (USDC), UST is decentralized, as Kwon reiterated. This makes it less vulnerable to single points of failure, government censorship, and other external vulnerabilities.

This is probably the reason Kwon seems certain about UST’s future growth. Via his Twitter account, Kwon said:

UST ‘s grew because its sovereignty is the only sensible model to scale decentralized money.

The Anchor Protocol, a Terra native product, offers UST holders the opportunity to earn a 19% APY. This has been one of the most important factors behind the surge in demand for the UST stablecoin.

In less than a year, UST has climbed to the top 15 cryptocurrencies by market cap and to the number 4th position in terms of stablecoin market cap. If the demand for UST continues, the entire Terra ecosystem will benefit.

The biggest concern about Terra and UST is Anchor Protocol’s capacity to sustain its APY, currently one of the highest in the market. Pedro Ojeda, a co-founder at SplitBrick, pointed out the mechanism to mint the stablecoin has been designed to protect Anchor:

Luna staking yields stablecoins+Luna. This has a beautiful property in which [ unlike ETH, BTC, AVAX etc whose staking return depends purely on coin price ] as Luna price drops, yield goes up naturally since (stablecoin+Luna)/Cheaper Luna = higher APR.

In the short term, Terra’s native crypto could face some hurdles to reclaim previous highs. Data from Material Indicators (MI) suggest small investors have been buying the recent rally.

However, investors with asks orders of around $10,000 have been suppressing price action keeping LUNA in a tight range.

Bitcoin could be the key for future appreciation on lower timeframes. If the benchmark crypto can break above $43,000, LUNA and other altcoins could follow.

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BTC’s price faces its own difficulties with a TD Sequential indicator flashing a sell signal on the daily chart and with MI’s trend precognition pointing downwards on the same period.