Terra Gains 75% Last Month As $2.57B In LUNA Tokens Removed From Supply

By Kevin • March 2, 2022 11:44 am • Comments

For the first two months of the year, the overall crypto market had seen a general decline from its all time highs back in the last few months of last year.

However, one of the few cryptos that stood out in February was Terra’s LUNA token which happened to be one of the best performing assets this year so far with an overall 75% gain for last month alone.

This indicates that its price movement has decoupled from the general market direction which has been greatly affected by recent geopolitical conflicts that have had significant impacts on the crypto industry.

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The reason for why some traders and investors are having an increased interest in LUNA as a safe haven could be for several reasons with one of them being Terra’s token economics.

CoinTelegraph reports:

Data fetched by analytics platform Smart Stake showed that Terra protocol burned 29 million LUNA tokens worth $2.57 billion recently.

That happened as the supply of TerraUSD (UST), a stablecoin backed not by the U.S. dollar but LUNA, increased from around 11.26 million on Feb. 1 to almost 12.92 million on Feb. 28, marking an increase of nearly 14.75%.

Traders consider an increasing UST supply a bullish catalyst for LUNA, mainly because of the so-called UST-LUNA token model.

In detail, Terra preserves UST’s peg of USD through an elastic monetary policy. So when the value of UST goes above $1, Terra incentivizes its users to burn LUNA and mint UST.

But when the UST supply contracts, LUNA valuation decreases due to a slowdown in the burning mechanism. All and all, LUNA’s valuation tends to rise alongside UST’s supply.

The organization behind LUNA and the Terra ecosystem, the Luna Foundation Group, had also recently announced that it had raised around $1 billion of LUNA by from several venture capital groups that are well known in the crypto space.

The purpose of the capital is to build a strong reserve that the Terra ecosystem could use to ensure the stability of Terra’s stable coin UST.

This news along with the burning of 29 million LUNA tokens are speculated to be the primary reasons for why investors are bullish on LUNA’s future outlook.

Since that announcement, the price of Terra’s native token LUNA has risen by around 90% while the overall crypto market has been recorded to have rallied around 13%.

Public.co.uk reports:

Terra’s technical outlook seems skewed to the upside owing to an ongoing “bull flag” breakout transfer.

Bull flags are bullish continuation patterns that seem when the cost consolidates decrease within a descending channel after a powerful transfer upward.

Sooner or later, it breaks out of the channel vary to the upside, with a value goal preferably at period equivalent to the scale of the upside transfer that preceded the bull flag formation.

LUNA seems to have entered the general segment its bull flag setup, as proven within the chart beneath. It now eyes a run-up towards $120, an all-time prime for Terra if completed.

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