Terra [LUNA] loses $6 billion in TVL in under two days thanks to this…
Terra achieved more than anyone’s expectations this year after setting multiple records across the crypto space, but the turn of events in the last few days have, for the first time, rocked the steady sailing of the DeFi chain.
Terra takes a break
In the last 48 hours, Terra has made some significant strategic developments. The first of them is increasing the native stablecoin TerraUSD’s (UST) liquidity and utility across ecosystems. In line with the same, the blockchain has welcomed a new Inter-Blockchain Communication Protocol (IBC) – Evmos, the EVM compatible hub of Cosmos.
Through this, Terra will be offering $3 million worth of incentives to 7 different protocols and an additional $5 million worth of liquidity.
In addition to this, TerraformLabs, in partnership with Outlier Ventures, launched the Terra Base Camp. Through this Accelerator program, participants will gain access to Outlier Ventures and Terraform’s resources to fast track their growth. Each team from the six startups will receive an investment of $125k initially, with the opportunity of gaining another $250k in additional funding.
For the second biggest DeFi chain, these developments are opportunities to attract more developers and investors. However, the conditions in the last 48 hours might leave investors wary.
Firstly, Terra has lost about $6 billion from its TVL, leaving the same at $23 billion, down from $29 billion.
This was led by the Anchor protocol primarily because the protocol changed its earn rate for the first time as per the dynamic earn rate program, reducing its APR from 19.4% to 18%.
This triggered its depositors, who pulled their money out of the protocol, resulting in Anchor losing $4 billion.
Consequently, this triggered the native token LUNA to drop by 23.26% in these two days.
A return from this is challenging since Terra investors don’t seem to be particularly elated with the DeFi chain. Their disappointment is clearly visible on-chain as this is the highest negative sentiment noted by LUNA since November 2021.
Furthermore, the risk-adjusted returns on the asset being at negative 4.19 will be sincerely concerning for new investors.
Thus for Terra, the most extensive support would come from the return of depositors to Anchor, which would help in the recovery of the lost, locked value.