After a rather chaotic Week 8 on cryptocurrency markets the total market capitalization lies at $1.75 trillion. On February 24, the crypto market moved in high correlation with the stock market as both reacted negatively to the news about Russia launching a ‘Special Military Operation’ in Ukraine. Bitcoin and the majority of other top cryptocurrencies lost more than 10% of their valuations that day. Nevertheless, most cryptocurrencies managed to rebound the next day, returning to their pre-war valuations. The world geopolitical situation is getting more heated each day which will inevitably have some monetary repercussions. Can cryptocurrencies actually benefit from this dire situation or will Week 9 be full of red numbers as investors move towards less riskier assets?
3. Anchor Protocol (ANC)
Anchor Protocol is a decentralized lending and borrowing protocol that offers up to 20% annual yield on Terra stablecoin deposits. While many project boast with high returns to attract users and then gradually lower the APYs, Anchor aims to maintain the 20% APY on UST at all times. The protocol’s native token is the ANC token, which is currently trading at a price of $3.80 has a total market capitalization of nearly $1 billion, while there are over $10.5 billion worth of digital assets locked in the Anchor Protocol.
ANC becomes the largest weekly and monthly gainer in the crypto top 100
ANC gained over 70% last week, which propelled this token on the top of the leatherboard of both weekly and monthly gainers from the crypto top 100. The rally started earlier this month when Terra announced it is injecting $450 million into the project to deliver the promised returns as there wasn’t enough borrowing demand to keep up with an influx of UST lenders.
Although a massive injection was needed to bridge this imbalance, Terra’s developer believes that a 20% APY is sustainable in the long run as Terra also stakes borrowers’ collateral to earn yields. In addition, Terraform Labs plans to allow compound liquid staking derivatives to be used as collateral in Anchor v2. This will allow users to take part in the so-called “double-dipping”, which means staking and earning yields as a liquidity pool provider with the assets placed as a collateral for their Anchor loan. Terraform Labs aim to attract more borrowers to enter the Anchor protocol and restore equilibrium with this feature.
2. Terra (LUNA)
The Terra blockchain acts as the basis of the same-named algorithmically governed stablecoin platform. The Terra platform, which is built on the Cosmos technology and utilizes a Proof-of-Stake (PoS) consensus mechanism, was developed by a South Korea-based company named Terraform Labs. LUNA, which is the reserve currency of the Terra platform, has three key functions; these are ensuring the price stability of Terra stablecoins, mining Terra transactions through staking and providing incentives to blockchain validators. There are currently more than $20 billion worth of various digital assets locked in the Terra ecosystem, with Anchor Protocol accounting for more than half of the ecosystem’s TVL.
The Luna Foundation Guard has raised $1 billion for a UST reserve fund
The Luna Foundation Guard (LFG), a non-profit organization that was set up to ensure the stability of the TerraUSD (UST) stablecoin peg and accelerate the Terra ecosystem’s adoption and growth, recently revealed that they have raised $1 billion to establish a Bitcoin-denominated UST reserve fund that will play a vital role in maintaining the UST’s algorithmically-controlled peg to the USD. According to official Twitter account of TerraUSD (UST), the new reserve fund will prove to be especially useful at preventing UST depreciation in case of a “bank run” – a state when a large number of users withdraw their funds from the protocol at the same time. The funds were raised through a private sale of $1 billion worth of LUNA tokens, which was led by Jump Crypto and Three Arrows Capital and saw participation from several other prominent venture capital firms. LUNA price jumped by more than 12% in the 24 hours following the announcement of what has been proclaimed as one of the largest private sales of its kind in the industry. However, LUNA appreciation did not end there. In fact, LUNA is still in a full-blown bull run that managed to defy, to some extent, the market-wide sell-off triggered by the Ukraine crisis. With its nearly 50% gain, LUNA was last week’s second-best performing coin from the top 100 cryptocurrencies, with the only other more profitable asset being ANC, a Terra ecosystem token. At the time of writing, LUNA is changing hands at $74, but Terra bulls are already aiming for $100 valuation. In addition, Terra’s TVL increased by 18% last week, which further increased Terra’s lead and left once more popular Binance Chain (BSC) further behind in terms of DeFi market share.
1. Bitcoin (BTC)
Although we believe Bitcoin does not need much introduction and that all eyes would be on it even if it were not featured on our list, here is a short summary of the history and key characteristics of the first truly decentralized digital currency. The world’s pioneer cryptocurrency was launched by pseudonymous figure named Satoshi Nakamoto in 2009 and has a capped supply of 21 million coins. The decreasing miner block rewards makes the cryptocurrency scarcer with time, ensuring a deflationary nature. Bitcoin is also often referred to as the barometer of the cryptocurrency market as other assets usually follow BTC’s price performance.
Will Bitcoin continue to correlate with the stock market or will it start to act like a safe haven asset?
On the one hand, Bitcoin’s price has historically closely correlated with U.S. equities and has continued to do so in the last few days. On the other, its safe haven and gold-like properties have been repeatedly touted by the community as one of its core characteristics. The thing is that both claims can’t hold true simultaneously. We believe that Bitcoin’s price action this week will reveal much about its long-term prospects as a safe haven asset since the heated political tensions and rising interest rates will act as a stress test for the world’s “digital gold”. If Bitcoin remains in lockstep with U.S. tech stocks, we will likely see a prolonged bearish market sparked by rising interest rates. However, if Bitcoin’s safe haven properties prevail, this largest cryptocurrency could actually benefit from the current geopolitical situation.
Blockchain analyst Willy Woo believes that Bitcoin is already a safe haven asset, but only in times when risk on the world markets is perceived as low and investors are eager to engage in riskier investment. In times when risk is perceived as high, such us in war time, however, investors still tend to gravitate towards gold, which he describes as risk-off safe haven asset.
Famous Bitcoin educator Anthony Pompliano also published a podcast on the topic of the war in Ukraine and Bitcoin. In the piece, where he writes about the importance of non-state-issued currency in times of conflict, he also wrote that there is a small yet existing chance that Bitcoin will become the global reserve currency in the next 50 years as countries like China and Russia could move away from USD-based reserve systems. In his opinion the U.S. has to be ready for this, even if the chance is super small, which is why he is pushing for removal of the capital gains tax on Bitcoin and incentivization of U.S. Bitcoin miners. As always, he also advocated for educating Americans about digital currencies and the global monetary system.
