Terra (LUNA) rallies as demand for UST is driven by Anchor Protocol surges.
LUNA’s relationship with UST means higher demand for UST drives LUNA prices up.
LUNA is currently trading in an ascending triangle pattern, an indicator of a potential breakout.
Terra (LUNA) continues to outperform the rest of the market by a huge margin. LUNA is the only major cryptocurrency that has retested its all-time highs since the crypto market turned bearish in November 2021.
The trigger behind this rally has to do with the relationship between LUNA and the stable coins that run on the Terra ecosystem, such as TerraUSD (UST). As the demand for UST grows, LUNA is burned, with the goal being to keep UST pegged 1:1 to the dollar. Going by the economic laws of demand and supply, the more LUNA is burned, the higher the price goes.
Recently there has been a huge demand for UST, as investors look to lend it on Anchor Protocol, a platform with an APY of up to 20%. This also means that the burn rate for LUNA has shot up, and by extension, the price has also gone up to the levels where it is now.
As long as Anchor Protocol keeps paying an above-average APY, then the chances are that LUNA could easily go on to make new highs, possibly above $200 in the short term.
LUNA trading in an ascending triangle
Source: TradingView
After the rally that saw it make new highs a few days ago, Terra is trading in an ascending triangle. This is an indicator of a potential breakout, which could see LUNA test prices it has never tested before.
Summary
LUNA is the only one of the major cryptocurrencies that are rallying. Its price action points to a potential continuation of the rally that started a few days ago and could see LUNA make new highs in the short term.
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