Due to rising investor optimism, LUNA, the native token of the DeFi-centric Layer 1 blockchain protocol Terra, has outperformed the top 10 cryptocurrencies in terms of gains over the last 24 hours. LUNA token is currently trading at $59.97, up 12.53% in the last 24 hours.
Terra outperformed the market leader Bitcoin (BTC), which gained nearly 2.7%, and Solana, which gained 6.17%. The cryptocurrency Avalanche (AVAX), which is up 10.97%, is another big gainer in the top 10.
The Luna Foundation Guard’s (LFG) plan to create a Bitcoin-denominated reserve as an additional layer of security for UST, which has a fixed 1:1 value to the US dollar, corresponds to LUNA’s recent price gains. LFG also announced that it had raised $1 billion in private token sales to add to its Bitcoin reserve, with buyers agreeing to lock up their coins for four years. The funding round included investors such as Jump Crypto and Three Arrows Capital.
Do Kwon, Terra Labs’ founder and CEO, stated that the reserve fund is consistent with the project’s overall objectives: “A decentralized economy needs decentralized money. And decentralized money needs decentralized reserves.”
Unlike rival centralized stablecoins such as Tether (USDT) and USDCoin (USDC), TerraUSD is not issued nor managed by a single entity.
TerraUSD, on the other hand, is a computational stablecoin with an arbitrage-based value. When the price of the currency falls below $1.00, users are encouraged to destroy Terra and mint LUNA, the project’s decentralized reserve coin. When the price exceeds $1.00, Terra is coined and LUNA is burned.
The reserve was designed to protect algorithmic stablecoins from one of the most serious threats: an unexpected black swan event that destabilizes the coin’s price peg and causes prices to plummet.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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