Terra (LUNA) resumed its upward march this week as its price per token rebounded by more than 30% three days.
LUNA's price almost reached $100 on March 9 following a 15% intraday rally, coming near its record high of $106 from December 2021. At its week-to-date (WTD) low, the Terra token was trading at $75.60.
The recent bout of buying in the Terra market appeared in part due to similar recoveries elsewhere in the crypto market. For instance, Terra's leading competitor in the smart contracts space, Ethereum, saw Ether (ETH) rising by 13.50% in the same period. Similarly, Bitcoin (BTC) also jumped by over 14% from its WTD low below $37,200.
Arthur Cheong, the founder of Defiance Capital, hinted on Wednesday that LUNA price increased because of Terra's ability to capture at least $1 trillion or more worth of decentralized stablecoin market space via its native U.S. dollar-pegged token, TerraUSD (UST).
The total addressable market size for the de-facto decentralized stablecoin is at least a few trillion dollars.$LUNA
Notably, the supply of UST tokens reached over 1.4 billion on Wednesday, its highest level to date, according to data provided by Smart Stake. At the same time, the Terra protocol removed 120 million LUNA tokens from the supply permanently.
To recap: LUNA maintains UST's dollar peg. So, if the stablecoin's price rises above $1, the Terra protocol burns LUNA and mints more stablecoins. Similarly, if UST's price falls below $1, LUNA's valuation declines in tandem due to a slowdown in the burning mechanism.
Thus, an increasing UST supply likely boosted LUNA's price rally in addition to the broader recovery in the crypto market.
LUNA's gains also appeared against the backdrop of more capital flowing into the Terra
Read more on cointelegraph.com