- Terra LUNA price has jumped sharply as its DeFi ecosystem expanded.
- There is the risk of Anchor Protocol’s market dominance.
- Technically, Terra has formed a double-top pattern.
Terra price continued to defy gravity this week as on-chain activity showed that activity remained vibrant in the network. LUNA is trading at $94, which is close to its all-time high of about $106. This performance brings its total value to about $34 billion, making it the 7th biggest cryptocurrency in the world.
Why LUNA is rising
The main reason why the Terra price is rising on Monday is that the platform’s Decentralized Finance (DeFi) activity is in an upward trend.
According to DeFi Llama, Terra’s network has a total value locked (TVL) of over $25 billion, making it the second-biggest platform in the world after Ethereum.
Notably, this platform has been growing in the past few weeks even as other platforms show some weakness. For example, Ethereum, Solana, and Fantom’s TVL has dropped by more than 15% in the past 30 days.
In the same period, Terra’s TVL has jumped by over 80%. This growth has been widespread, with most of its platform doing well. For example, Anchor Protocol’s TVL has soared to over $12 billion, making it the biggest platform in Terra’s ecosystem.
Lido has also shown strong growth, with its TVL rising by more than 60% in the past month. Other DeFi platforms in Terra like Astroport and Stader have all seen substantial gains.
While this growth is good, it exposes Terra to risks. For one, Anchor Protocol has a market dominance of about 50%, meaning that a single issue could lead to substantial challenges. We have seen this recently, when the Fantom price crashed after two leading developers in the ecosystem left the network.
In contrast, the biggest DeFi app in Ethereum’s ecosystem is Curve Finance, which has a market dominance of just 14%. Therefore, if something happened to Curve, Ethereum would likely keep doing well.
Still, Terra has more moving parts that could offset the Anchor challenge. It owns Terra USD, the fourth-biggest stablecoin in the world. It also owns Chai, a leading fintech platform in South Korea.
Terra price forecast
In the previous part, we have looked at a major fundamental risk facing Terra. There is another risk when you consider technical and fundamental analysis. The risk is that the Terra price has formed a double-top pattern at about $105. In price action analysis, a double-top pattern is usually a bearish signal.
The chin of this double-top pattern is at around $43. Therefore, while the LUNA price is above the short and longer term moving averages, a pullback cannot be ruled out until the price moves comfortably above $105.
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