Anchor Protocol sustainability concerns are putting selling pressure on Terra (LUNA)
The price of Terra (LUNA) is down over 16% over the last 24 hours, according to data provided by CoinMarketCap.
It is currently the worst performing cryptocurrency among the top 100 coins by market capitalization. Bitcoin and Ethereum are flat at press time. Binance Coin (BNB) is up almost 5%.
LUNA is now down 52.25% from its all-time high of $103.34 that was recorded on Dec. 27.
The depletion of Anchor’s reserves
The significant drop comes amid growing concerns over the sustainability of Anchor, a lending-and-borrowing project on top of Terra. The protocol’s yield reserve recently fell to UST$35 billion, shrinking by 50% in about a month. At this rate, the reserves will be completely depleted within a few weeks, which would be disastrous for the Terra ecosystem. Anchor has a total locked value of $7.32 billion, making it the seventh largest DeFi protocol overall.
Anchor offers a highly compelling stable annual percentage rate of 19.5%, but some critics argue that it might not be sustainable.
Do Kwon, co-founder of Terraform Labs, recently tweeted that he was willing to subsidize the yield reserve to ease investor concerns. He hinted that he was ready to inject up to $300 million, which could be a short-term solution.
The sell-off has pushed the TerraUST (UST) stablecoin slightly off its peg.
Recently, UST overtook Dai (DAI) by market capitalization, vying to become one of the leading stablecoins.
