The dollar-pegged Terra ecosystem’s UST recently overtook Binance’s BUSD, to become the third-largest stablecoin by market capitalization. We come back to this rapid ascent.
Terra’s UST becomes the 3rd capitalization in the stablecoin market
The stablecoin of the Terra (LUNA) blockchain , the Terra UST (UST), is in excellent momentum since it became the third largest stablecoin in terms of capitalization at the beginning of the week. After overtaking another stablecoin, DAI, a few weeks ago, today it passes Binance’s stablecoin, Binance USD (BUSD).
As of this writing, UST has a market capitalization of $17.6 billion , just ahead of BUSD’s $17.3 billion. So there is only $300 million difference, but the gap is widening day by day (yesterday there was only $60 million difference between the two).
It thus becomes the 3rd most capitalized stablecoin after the famous Tether (USDT) and its 82.7 billion dollars of capitalization, and the USD Coin (USDC) and its 49.8 billion of capitalization. The gap is therefore still very large compared to these two stablecoins, which is normal given their age.
But we must not exclude the possibility that the UST will move to the second position on the stablecoin market in a few months, since in just 6 months, its market capitalization of the UST has increased fivefold (+525% since mid-November) . A dynamic that is attributed not only to the explosion of the Terra ecosystem and its Luna token, but also to the many advantages of the stablecoin, including an APY that reaches 25% for staking.
Despite this well-deserved 3rd place in terms of market capitalization, the UST has much lower daily trading volumes than its immediate competitor, the BUSD . While it recorded a trading volume of $531 million in the last 24 hours according to CoinmarketCap, BUSD recorded a volume of $4.5 billion in the same period.
But the dynamics of the Terra ecosystem are not only based on their stablecoin. The LUNA token has also shown very good growth in recent months. According to data from CoinGecko, over a 1 year the LUNA has increased from $13 to over $90, an increase of +592% . It has a capitalization of $31.8 billion , which places it 8th in the ranking of the most popular cryptocurrencies with investors .
The meteoric rise of the Terra (LUNA) ecosystem
The Terra ecosystem continues to be talked about. Terra stablecoin was launched in September 2020 and it has already become the most popular algorithmic stablecoin in the cryptocurrency market . It is a decentralized stablecoin that aims to facilitate payments.
Its rise is explained by several factors, in particular the increase in the value of LUNA , as well as the wish of the Luna Guard Foundation to maintain the token with reserves of Bitcoin . Last month, Terra endowed itself with $10 billion worth of Bitcoin (BTC) to support the reserves of its stablecoin.
More recently, Terra added over 4,000 bitcoins to its wallet to continue to bring strength to its stablecoin project. The project continues to make headlines in many crypto media, although some people see this massive Bitcoin purchase as evidence of the developers’ distrust of their own token.
In parallel, the LUNA broke its historic record on April 5 with a price of $119.18 . Right now, it remains quite high from its lows, with the trade price at $89. Enough to promote the explosion of the Terra ecosystem, which does a lot of work to bring credibility to their project.
The other factor that is likely driving the strong development of UST is the desire of cryptocurrency investors to diversify their portfolio and mitigate risk . Stablecoins are indeed designed to minimize volatility by attaching their value to an asset that does not suffer from high volatility, such as fiat currencies (dollar, euro, etc.). In a falling market, crypto investors therefore seek to protect themselves from fluctuations (like a stock investor might do by buying gold).