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Crypto project Terra Money ($LUNA) has surged 50% in the last week to hit a new all-time high even with bitcoin down 5% Its algorithmically-backed stable coin $UST has become the largest of its kind and keeps picking up Web3 adoption as the DeFi dollar. Why that is huge?
Zack Guzman expressed: A “DeFi dollar” has been the elusive holy grail of crypto. How do you make a stablecoin stay at $1? The largest stablecoins (Tether and USDC) are backed by cash. But what if regulators seize those accounts? What if a company lies about its holdings?
Terra’s simple starting point is that its stablecoin is not backed by cash or assets at all. Instead, it’s backed by its own cryptocurrency. People can convert LUNA into UST and vice-versa. While Luna’s price fluctuates, UST remains priced at $1.
A big change prompted the latest 50% rally: Before, any time someone converted LUNA into UST, a portion of LUNA would stack up in a community pool Now, after Terra’s Columbus-5 upgrade, LUNA is just being burned.
That’s made LUNA more deflationary and more likely to rise in price so-long as more people adopt UST as their stablecoin of choice. That has rapidly become the case in 2021. YTD % growth in stablecoin market cap: Tether: 269% USDC: 846% UST: 4,154%
That’s the simplest case for understanding what Terra Money is solving (it overlooks that it also carries pegs to other currencies beyond just the US Dollar, which is also huge for global adoption.) It also doesn’t take into account all the DeFi building taking place on it.
Overall, as Terra founder Do Kwon has told me, “A decentralized economy needs decentralized money.” So far, Terra Money has done the most in 2021 to deliver on that prospect.
People who bought LUNA the first time I booked Do to come on my show in July would be up 800% People who bought in February when I asked Novogratz about Galaxy Digital’s $25 million investment in LUNA would be up 1,000%
In the end, the crypto projects that win out will be the ones solving real problems. Follow for more insights and explainers on the best ones to watch.
Community Reaction: Sure, US gov want to control stable coins like Tether and they know they’re backed. They just want a piece of the pie (or the whole pie).
The stablecoin is the most important product in crypto, uniquely serving the currency function of cryptocurrencies. And the moon is the only asset that captures value from the rise of stablecoins.
