Why LUNA’s Recent Rally Could Be The Start Of A Bullish Trend

Amongst the best-performing assets in the crypto space over the past week, Terra (LUNA) has registered 18.9% gains over the weekend. Just behind AAVE (+19%), SNX (+20.8%), and SUSHI (+21.8%), LUNA has managed to outperform YFI and RUNE, two of the most resilient DeFi assets, per a Messari report.

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Source: Messari

Developed by Terraform Labs as a blockchain to support stable programmable payment and an “open financial” infrastructure with a lending protocol and a synthetic assets platform, Terra’s ecosystem is composed of a basket of fiat pegged stablecoins. LUNA is used to “stabilized” this basket.

Terra has the ultimate objective of replacing banks, credit card networks, and payment gateways, as stated in the protocol’s official website. Therefore, Terra has created a blockchain layer with solutions that can be adopted by merchants and consumers. Since its inception:

(…) it continues to steadily provide infrastructural improvements and tools for the foundations of laying down a credibly neutral, distributed, and radically transparent ecosystem.

LUNA is trading at $14,21 with a 6.3% in the daily chart. In the weekly and monthly chart, LUNA has 8% and 30.6% losses, respectively. Although it has been following the general sentiment in the market, LUNA and Terra’s ecosystem seem poised to resume their bullish momentum.

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LUNA with moderate gains in the daily chart. Source: LUNAUSDT Tradingview

Terra (LUNA) with potential to drive further demand

LUNA holders can use the token to obtain staking rewards from three main sources: compute fees or gas fees, taxes, and seigniorage rewards. The rewards are determined by the amount of LUNA staked. If the transaction volume on Terra’s blockchain increases, so do the rewards receive by LUNA holders.

Therefore, the rewards function as an incentive mechanism to bet on Terra’s long-term growth. Stablecoin UST, part of the ecosystem, saw an 800% growth in 2021, per a report by CoinGecko. This stablecoin climbed to the 5th position by market cap. The report claims:

Unlike most ETH-based algo stablecoins, UST has managed to create a reliable peg through an ecosystem than incentivizes usage and attracts a strong community.

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Source: CoinGecko

Mirror protocol is powered by smart contracts based on the Terra network and is a major source for UST demand. The protocol allows users to create synthetic assets or Mirrored Assets, like stocks, that “mimic” the price of the real-world asset.

CoinGecko stated that Terra “capitalized on Robinhood debacle” when the GameStop (GME) drama reached its peak. Also, Terra’s Anchor Protocol offers a product with a 20% fixed interest rate based on UST. The report states:

Upcoming project such as Alice, SPAR And Vega are expected to further strengthen the demand for UST.

As reported by staking provider SmartStake, there was $4,7B LUNA staked as of April 17th with $223 million deposit in Anchor UST and $518 million in Anchor bLuna as collateral. Mirror Protocol as $2,078,234,849 on its platform. In total, Terra has a Total Value Locked of over $7 billion.

LUNA has been listed on Bitfinex, Tokocrypto, Bitfinex and is becoming a key component of Binance and its ecosystem.

Do Kwon, co-founder of the Terra ecosystem, shared a tweet by James Wang, an analyst at investment firm ARK Invest, with a highly bullish perspective on LUNA. Wang is a MIR holder and an active voter on its governance model.

Founded by Catherine Woods in 2014 and with $52.85 billion assets under management, ARK Invest is one of the most important investment firms in the U.S. It currently holds the “largest” Exchange Traded Fund (ETF) portfolio in the traditional market.

Do Kwon asked James Wang if they shall get ARK Invest to allocate capital on Mirror, Wang replied: “Yes!”. However, no official announcement has been made by Terraform Labs or Ark Invest.

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