Terra (LUNA), has risen to $55, as it seeks to regain a bullish pattern.
It traded at $61.56, an increase of 13.18% in 24 hours. It has seen a daily high of $63.99, and a low of $52.71.
Why Terra (LUNA), is on the rise
Luna Foundation Guard (LFG), which recently raised $1 Billion through an Over-the-Counter Sale of LUNA, is one of the main factors behind the Terra (LUNA ) price rise.
LFG is a non profit organization. It was founded in January 2022 to promote Terra ecosystem growth.
Among the others who participated in the LUNA sale were the Three Arrows Capital (Jump Crypto), DeFiance and Tribe Capital (GSR) and Republic Capital.
LFG claims that the Bitcoin-dominated Forex Reserve was chosen by LFG because it is less closely related to Terra.
How the UST Reserve works
Terra native stablecoin, UST, is a popular algorithmic cryptocurrency in the DeFi ecosystems. This stablecoin does not need collateral to maintain it price.
“When the demand for Terra is high and the supply is limited, the price of Terra increases. The price of Terra drops when there is less demand and more supply. The protocol ensures the supply and demand of Terra are always balanced, leading to a stable price.”
You can make new Terra-based stablecoins by burning LUNA tokens and/or UST to create LUNA. But the challenge is the hypothetical risk of a ‘bank run’ Scenario and its reflexive nature.
LFG stated that Bitcoin was a suitable reserve asset.
“Although the widespread adoption of UST as a consistently stable asset through market volatility should already refute this, a decentralized Reserve can provide an additional avenue to maintain the peg in contractionary cycles that reduces the reflexivity of the system.”