Terra Price Gained 75% With $2.57B LUNA Tokens Removed From Supply

The Terra price gained 75% with the token burn appearing as the supply of UST increased by 14.75% in the month so let’s read more today in our latest cryptocurrency news.

Terra emerged as one of the best performing financial assets over February which was a month mired by geopolitical conflicts and the negative impacts on the crypto markets. The Terra price gained 75% to reach $91.50 and in comparison, the percentage performance of other tokens mainly BTC and ETH in the same timeframe came out to be around 12.25%. most of the LUNA gains surfaced on the month’s last day and the tErra token surged 26% due to similar upside moves somewhere else on teh market. For example, BTC and ETH increased by 14.50% and 11.50% on the same day.

1/ The long awaited [REDACTED] 💎3 is here!

📣 The Luna Foundation Guard (LFG) has closed a $1 billion private token sale to establish a decentralized $UST Forex Reserve denominated in $BTC! 📣

🧵👇

— Terra (UST) 🌍 Powered by LUNA 🌕 (@terra_money) February 22, 2022

While still positive at 0.09, LUNA’s correlation with BTC came of lately after reaching 0.
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81 at the end of February with a correlation of 1 meaning that the two assets are in lockstep while 0 shows that the price moves independently. Terra’s LUNA/BTC pair showed its growing valuation against the main cryptocurrency. The LUNA/BTC pair increased by 56% suggesting traders are looking for a hedge in the terra token as BTC’s correlation with a bearish stock market growing and reached 0.7 earlier this year.

As to why traders seem to have considered LUNA as an interim safe haven in the first place, the answer could lie in Terra’s token economics. The data from Smart Stake show that Terra’s protocol burned 29 million LUNA tokens worth $2.57 billion whcih happened as the supply of TerraUSD as a stablecoin backed by LUNA increased from around 11.25 million to almost 12.92 million marking an increase of 14.75%.

The traders consider an increasing UST supply as a bullish catalyst for LUNA because of teh so-called UST-LUNA token model which preserves the peg of USD through an elastic monetary policy so when UST goes above $1, Terra incentivizes users to burn LUNA and to mint UST. When the UST supply contracts, LUNA valuation drops because of a slowdown in the burning mechanism and LUNA’s valuation trends to rise alongside UST’s supply.

Just recently, the Luna Foundation Guard that supports the Terra blockchain ecosystem announced that it raised $1billion in LUNA token sale round led by Three Arrows Capital. LUNA’s price increased by 90% since the announcement and in contrast, the total market cap of all cryptocurrencies combined rallied by 13% in the same time frame underscoring that the trader shave been flocking on the market.