Why I’m Bullish on Terra for 2022

With popular cryptocurrencies like Bitcoin and Ether spinning in value in recent months, many people are looking to so-called stable coins like Terra to invest in because of their more predictable prices. By definition, Terra is open-source blockchain payment platform like any other, but to maintain balance of its stablecoins, Terra mints and burns tokens. As of April 1, the Terra (LUNA) price is at $ 100 (about Rs. 7,595) and its market capital is just over $ 35 billion (about Rs. 2.65,850 crore).

I’m bullish on Terra (LUNA) for 2022, read on to find out why.

Introduction to Terra

Terra is an open source public blockchain protocol for algorithmic stablecoins. It enables the creation of fiat-pegged stablecoins that can be redeemed, stored, traded or exchanged on the Terra blockchain.

Terra offers stablecoins linked to:

  • US Dollar (USD)
  • Chinese Yuan (CNY)
  • Japanese Yen (JPY)
  • British Pound Sterling (GBP)
  • South Korean won (KRW)
  • Euro (EUR)
  • SDR (Special Drawing Rights) To IMF

Terra’s native token, LUNA, is used to stabilize the price of Terra stablecoins. LUNA is also a governance token, as it enables holders to submit and vote on proposals for governance.

The Terra economy has two pools – one for Terra stablecoins and one for LUNA.

The price of Terra stablecoins is maintained by the Terra algorithmic market module through Expansion and Contraction.

Expansion

If the price of a Terra stablecoin is high compared to the pegged fiat currency, it means that the supply is too low and the demand is too high. At this stage, the protocol encourages the burning of LUNA to mint Terra Stablecoins. This minting increases the supply of Terra stablecoins and balances the supply with the demand.

Users keep Terra stablecoins coins until the stablecoin reaches its target price.

Contract

If the price of a Terra stablecoin is low compared to the pegged fiat currency, it means that the supply is too high and the demand is too low. At this stage, the protocol encourages the burning of Terra stablecoins to coin LUNA. This minting reduces the supply of Terra stablecoins and balances the supply with the demand.

Users will continue to burn Terra stablecoins until the stablecoin reaches its target price.

Terra as in DeFi Blockchain

Terra is the second largest decentralized finance (DeFi) blockchain with 26 active DeFi protocols and a Total Value Locked (TVL) of just over $ 29 billion (approximately Rs. 2,20,295 crore). The main DeFi protocols running on Terra are:

  • Anchor (ANC) with a nearly $ 15 billion TVL (about Rs 1,13,955 crore)
  • Lido (LDO) with a TVL of just over $ 8 billion (approximately Rs. 60,775 crore)

Terra (LUNA) rating

Let’s rate Terra (LUNA) as a DeFi blockchain.

The relevant metrics are:

Total Value Assessed (TVL): $ 28.15 billion (approximately Rs. 2,13,850 crore)
Circulating Supply (CS): 354,399,415

The ratings are:

Scenario Formula Projected Price
Bearish (TVL * 1, / CS $ 79 (about Rs. 6,000)
neutral (TVL * 3) / CS $ 238 (about Rs. 18,080)
Bullish (TVL * 4) / CS $ 318 (about Rs. 24,155)

Rohas Nagpal is the author of the Future Money Playbook and Chief Blockchain Architect at the Wrapped Asset Project. He is also an amateur boxer and a retired hacker. You can follow him on LinkedIn.



Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any kind offered or endorsed by NDTV. NDTV is not responsible for losses arising from an investment based on any perceived recommendation, forecast or any other information contained in the article.


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