Terra Hits Another All-Time High, Ranks 10th Largest Coin By Market Cap

On Friday, the native cryptocurrency of the Cosmos-based Terra network, LUNA, hit a new all-time high of $70.40. The price surge ensures that the cryptocurrency also successfully displaced Dogecoin yet again to rank the tenth largest cryptocurrency by market capitalization.

Meanwhile, shortly after hitting the all-time high, LUNA dipped slightly again and at press time, is presently trading for $67.70, even though it’s still up by around 7.19% for the day, according to data from Coinmarketcap.

LUNA Price Surge Linked To Developments Within The Terra Ecosystem

Presently, Terra is only the 5th-largest layer 1 smart contract-enabled blockchain. Coming hot on the heels of Ethereum, Solana, Polkadot, and Cardano. But the ongoing price increase that LUNA is experiencing is not unrelated to recent developments within the Terra ecosystem, with the Columbus-5 upgrade being the most notable development on the protocol.

Launched on Nov. 30, the upgrade creates a kind of burn mechanism that makes LUNA a lot more scarce to find.

Prior to this upgrade, whenever Terra’s dollar-pegged stablecoin (UST) starts trading above its $1 peg, the protocol would burn some LUNA coins so as to incentivize arbitragers to mint more UST. In short, simply increasing the supply of UST, would mean a price fall.

In a similar manner, when the opposite occurred, a portion of UST was usually burned in order to mint more Luna. Thus, maintaining a stable peg.

Interestingly, before the Nov. 30 upgrade, and as earlier mentioned, only a portion of both UST and LUNA are burned in both cases, while the remaining portion would be transferred to a community pool. But now with Columbus-5, all remaining coins in the community pool are burned.

In addition to the upgrade, demand for UST is also on the high side. And since the only way more UST can be minted is by burning LUNA, then it’s just understandable how the native coin continues to hit seemingly unending all-time highs after all-time highs.