Anchor Protocol (ANC), the decentralized finance (DeFi) platform built on the Terra blockchain protocol, rebounded nearly 300% in over a month after bottoming out near $1.26.
ANC price went as high as $4.97 on the Bitfinex cryptocurrency exchange on March 3, 2022, breaking above the previous record peak near $4.50 established on Dec. 3 last year.
In doing so, the Anchor Protocol also erased all the losses it had incurred during what some called the “crypto winter” that started in Q4/2021 — against the prospects of the Federal Reserve’s aggressive rate hikes.
ANC/USD daily price chart featuring its recent bottom and top levels. Source; TradingView
ANC is the governance token of the Anchor Protocol’s decentralized money market that offers UST (Terra’s dollar-pegged stablecoin) depositors a stable 20% annual percentage yield (APY). In addition, it enables borrowers to collateralize UST loans using bonded LUNA (bLUNA).
— Do Kwon (@stablekwon) February 18, 2022
As a result, the Anchor Protocol creates demand for UST, which, in turn, promises to remove more LUNA tokens out of circulation. That is due to Terra’s economic model, which incentivizes users to mint UST when its value goes above $1 by burning LUNA supply.
ANC’s upside retracement in January 2022 started primarily in the wake of similar price recoveries across the crypto market but picked up momentum at the end of February while mirroring bullish moves in the Terra (LUNA) market.
Notably, the correlation coefficient between ANC and LUNA rose from zero on Feb. 23 to 0.91 on March 3, meaning Anchor Protocol’s price has been more or less mirroring the moves of the Terra blockchain’s native token.
ANC/USD daily price chart featuring its correlation with LUNA/USD. Source: TradingView
As Cointelegraph covered earlier, the upside boom in the Terra market emerged after Luna Foundation Guard (LFG) — a nonprofit organization supporting its blockchain ecosystem, raised $1 billion in a LUNA token sale round to create a so-called “UST Forex Reserve.”
In response, LUNA’s price rallied by nearly 90%. ANC also surged…