A popular cryptocurrency analyst has suggested that Ethereum ($ETH) rival Terra ($LUNA) could see its price explode over 70% if it manages to break through its previous all-time high around the $104 mark.
The popular pseudonymous analyst, Kaleo, told his over 470,000 followers on the microblogging platform he sees LUNA as an “outlier in an otherwise dull crypto market,” before pointing out its potential to rally.
Data from CryptoCompare shows LUNA is currently trading at $89 after losing about 2% of its value over the last 24-hour period. Over the last 30 days its price rallied from around $50 to get close to its all-time high.
Kaleo, as DailyHodl reported, also looked at LUNA when traded against the flagship cryptocurrency Bitcoin ($BTC) and suggested that on that pair LUNA is “already in price discovery” after enduring over two months of accumulation.
Earlier this year, the Luna Foundation Guard (LFG) announced it raised $1 billion through a private token sale to build a bitcoin reserve the stablecoin, whose value is pegged 1:1 to the U.S. dollar. The funding round was led by Jump Crypto and Three Arrows Capital, and the reserve is set to increase the stability of UST.
LUNA is used to keep the algorithmic stablecoin’s peg to the U.S. dollar. While UST isn’t backed by any assets in reserve, its value is fixed through the minting and burning of LUNA as users can always swap $1 worth of LUNA for 1 UST and vice-versa.
If the price of UST drops below $1, it can be swapped for LUNA and sold for $1, making it attractive for arbitrage traders. If it goes over the $1 mark, LUNA token holders can trade tokens for 1 UST for a profit. LUNA is minted and burned to enable these transactions.
The value of Bitcoin is less correlated to Terra’s ecosystem, so BTC reserves are expected to mitigate the risk of a death spiral during bearish periods. The Luna Foundation Guard has said that in the future it may introduce other major non-correlated assets to its reserve.
According to Binance Research, Terra is a Proof of Stake (PoS) blockchain. They also say that LUNA is “used in the issuance of stablecoins (TerraSDRs), as a price stability mechanism, as well as for staking and network governance.”
Terra was developed by South Korean blockchain company Terraform Labs, which itself was founded in January 2018 by Danial Shin and Do Kwon. Terra’s mainnet was launched in April 2019 and its native token initially saw relatively muted price performance.
Earlier this month, Terra’s LUNA was, along with meme-inspired cryptocurrency Shiba Inu, added to leading digital payments platform Wirex, which has over 4.5 million users.
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