Terra has been making waves in the stablecoin and staking space for its features and returns. However, with the success of the network, there have been other blockchains that have sprung up with similar offerings to try to get a piece of the pie from Terra. This has led the network to take steps to guarantee its spot in the market. First was the bitcoin reserves, and now, it has been revealed that Terra is looking to add AVAX reserves to ward off competitors.
Terra Using AVAX Reserves
Terra has taken to purchasing leading cryptocurrencies in the market to act as reserves for its growing stablecoin UST. After purchasing hundreds of millions worth of bitcoin, it has now turned its focus to another cryptocurrency to serve as a reserve. This time around, Terraform Labs (TFL) in conjunction with the Luna Foundation Guard (LFG) has purchased $200 million worth of AVAX. This trade was made directly from the Avalanche Foundation to serve as a crypto reserve asset.
There are solid reasons why the Foundation has chosen certain cryptocurrencies to serve as its reserve asset. For bitcoin, it was the fact that it was the leading cryptocurrency and its value to investors. For AVAX, founder Do Kwon explained that it chose AVAX due to the growth and loyalty from users of the AVAX ecosystem.
“Avalanche is still a growing ecosystem — a lot of it is fueled by loyalty to the AVAX token and users feel a lot of affinity with an asset that aligns itself with AVAX,” Kwon explained. “Whereas for the average Ethereum user, aligning yourself with Ether doesn’t really mean that much.”
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The announcement comes on the heels of competitor NEAR Protocol announcing that it was planning to launch its own stablecoin called USN that would offer APR as high as 20%. This IS no doubt a play to poach users from the Terra platform which has attracted a large number of crypto investors due to its high APR.
NEAR Protocol currently only has about $300 million in TVL compared to Terra’s $29 billion but Crypto Insiders founder Zoran Kole believes that by launching the USN stablecoin with such high APR, combined with the fact that it is one of the protocols with the most active development, then NEAR will be able to rival, if not surpass, the TVL and market cap of Terra.
Terra’s partnership with Avalanche promises a unique cross-chain experience for its users while strengthening the position of the UST in the market. “The partnership will also provide distinct benefits to the Avalanche ecosystem at large, by connecting the #LUNAtics & Terra builders with the vibrant Avalanche ecosystem, ushering in an immersive cross-chain experience,” Terra said in a Twitter post.
