- Terra’s luna cryptocurrency has gained around 80% in a week, making it bigger than either shiba inu or avalanche.
- A network upgrade and upcoming changes to how users report their tax liabilities have driven the surge.
- JPMorgan’s Nikolaos Panigirtzoglou said recently terra’s stablecoin mechanism means it’s good for cross-border payments.
Terraform Labs’ luna is fast becoming one of the crypto market’s best performers, having gained around 80% in value in the last week alone.
The gains have come thanks to a combination of falling supply of tokens, and a series of changes in how the coin is used in its own payment network.
Luna’s even overtaken dogecoin-darling shiba inu and “ethereum killer” avalanche’s avax to become the 11th biggest cryptocurrency by market value, according to data from CoinMarketCap.
The Terra blockchain launched in January 2018 and uses fiat-pegged stablecoins to run its payments system. Its native luna token is then used to stabilize the price of the protocol’s algorithmically-backed TerraUSD stablecoin, UST. According to its whitepaper, luna holders can submit and vote on governance proposals of their own.
This week, investors voted to allow community funding for an overhaul of the network’s “TrackTerra” tax and reporting app. That will allow luna holders to export transactions to different tax software programs, according to a tweet from developer Terra.
The US government is tightening the rules around tax liabilities stemming from cryptocurrency transactions. This was one of the catalysts that knocked bitcoin, ether and other major coins lower in November, when Joe Biden’s infrastructure bill — which includes regulations for crypto — passed into law.
Luna has been one of the strongest-performing major cryptocurrencies over the last seven days, much to the enthusiasm of its “LUNAtic” community of supporters. The price was up 7.2% at $67.83 in the 24 hours to 06:45 a.m. ET on Friday, bringing its market capitalization above $26 billion. Earlier in the day, it hit a record $70.46 on the Binance exchange.
Its network rolled out a major upgrade last month, aimed at better maintaining the peg of the TerraUSD to its fiat value. In turn, that resulted in over 93 million luna tokens being “burned,” effectively vanishing from circulation, according to FX Leaders analyst Aiswarya Gopan.
Part of luna’s popularity is coming from the rapid evolution of decentralized finance. Along with competitors such as avalanche and solana, terra has been gobbling up market share from leading DeFi blockchain ethereum, thanks to its faster transaction speed and lower “gas” fees.
JPMorgan currency strategist Nikolaos Panigirtzoglou flagged Terra’s advantages relative to some rival protocols in a recent research note.
“Terra is a stablecoin-issuing platform using a mechanism that minimizes volatility to achieve close peg of the issued stablecoins to fiat currencies,” he said.
“This mechanism, operating via dynamic expansion and contraction of token supply, issues several regional stablecoins that can be swapped, making the Terra platform particularly suitable for cross border payments,” he added.