In 2021, the value of LUNA increased 130 times, entering the TOP-10 blockchains by capitalization.What was the reason for this?explosive growth, and what records await LUNA in 2022 - in this material.
Terra,LUNA,UST
So that the inexperienced reader does not get confused,Let's define how Terra, LUNA and UST are related. Terra is the name of the project and the blockchain, LUNA is an intrasystem currency with a floating exchange rate, UST is the project’s stablecoin pegged to the US dollar at a ratio of 1:1.
Terra's goal is to become a reliable bridge between fiat andcryptocurrencies. The main disadvantage of secure and decentralized currencies like Bitcoin is high volatility. This hinders the acceptance of Bitcoin as a means of payment, especially for long-term transactions.
Image Source:BofAGlobalResearch
The main disadvantage of stablecoins is centralizationand the possibility of uncontrolled emission. Terra solves both of these problems: UST is decentralized, and its emission is linked to LUNA by a mathematical algorithm and does not depend on the will of the publisher. To obtain UST, the user must burn the appropriate amount of LUNA. If demand for UST grows, LUNA validators are rewarded and the money supply increases. If there is an excess of coins, some of them are burned by the system.
Application Growth
UST was launched in September 2020 and is nowits capitalization is approaching $11 billion and it is #1 among decentralized stablecoins. The cryptocurrency market is in dire need of such tools, as centralized solutions such as Tether carry high risks due to insufficient foreign exchange reserves. In 2022, UST will continue to gain popularity, which will allow the stablecoin to overtake Binance USD in terms of capitalization.
Image Source:coingecko.com
In the decentralized finance sector Terrais growing even faster - in the past year, its share increased from 0.2% to 7.5%. Blockchain is currently in second place with $18.5 billion of funds locked up, behind only Ethereum.
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Forecast
Image Source: Cryptocurrency ExchangeStormGain
UST is not the only stablecoin on the Terra blockchain.Since network members can also offer new coins for issuance, further expansion of Terra in regional markets is expected. This will lead to an increase in demand for LUNA and a further increase in value. The number of exchanges accepted by UST for payment will also grow: now there are only 26 of them against 452 for Tether.
Terra has excellent growth prospects not onlyby expanding the crypto market, but also by absorbing the share of Tether in the stablecoin market and Ethereum in the DeFi market. A three- or five-fold increase for LUNA can be considered a moderate forecast for 2022 under favorable conditions for the cryptocurrency market. This gives a target corridor of $240 - $400 per coin.
Analytical group StormGain
(platform for trading, exchanging and storing cryptocurrency)
