LUNA IS IN THE TOP 3 DEFI TOKENS BY MARKET CAP (see this)
LUNA has gone from about USD 5 in August to over USD 30 in September because of the buying pressure from institutional investors who must be increasingly confident on the now battle tested UST-based Terra Ecosystem.
The value of LUNA represents the value of the ecosystem because the entire network is based on the LUNA-UST pairing. The value of the UST (algorithmic stablecoin) is kept pegged to the dollar by burning and minting LUNA accordingly by arbitrage traders, depending on the demand for UST which is central to pay for transaction fees in all of Terra's DeFi protocols.
Demand for Terra's DeFi --> Demand for UST pushes price up --> LUNA is burnt to mint UST and keep it pegged to the dollar --> Decreased supply of LUNA increases price = LUNA to the Moon.
So if you are bullish on Terra like I am, it is only natural to want to HODL LUNA. But its not good to keep it idle in an exchange, you're much better off putting it to good use and making further gainz, often with no additional risk. Below are a few simple ways of doing this:
1) STAKING LUNA (~5% APY, incl. MIR and ANC Airdrops)
The most straight forward way of gaining interest on your LUNA without losing exposure is by Staking it on TerraStation (either on your mobile phone or PC). The UI is straightforward, all you need to do is add LUNA to your TerraStation Wallet, go on the Staking tab, and Delegate your LUNA to one of the 133 validators available.
As of the time of writing (Sep-2021) 34% of all LUNA is currently being staked.
The interesting thing is that not all the rewards are paid in LUNA. I've had Thai, Korean, Malaysian Terra stablecoins paid as part of my rewards. You will also get airdropped ANC and MIR tokens which rumour has it are largely undervalued. In order to claim these you have to connect to the Anchor Protocol and Mirror Protocol WebApps and are paid weekly (Note: If you don't have something like >10 LUNA staked, the transactions fees might be higher than the airdrops as of today's ANC and MIR prices.
How to choose a validator? Well, I suggest you do your own research as if your chosen validator misbehaves (double-signs blocks) or has extended downtime, a portion of your capital and rewards may be slashed. Here are a few things to note:
Token Airdrops: Some Validators like Orion.Money have promised airdrops of their own DeFi protocol tokens. The Orion Money dApp has promised to bring the famous Anchor Protocol (where you can make 20% APY over your UST) to USDC, USDT and DAI stablecoins. I am yet to see this airdrop happen though...and apparently other notable airdrops include White Whale token (Terra's arbitrage dApp) and Angel Protocol (Charity dApp).
Validators' Self-Delegation: shows you how much of their own LUNA they are staking. To me this is a measure of confidence as they are putting their own coins at risk of slashing. The downside is that these validators often charge high commissions on your rewards (up to 10% at the time of writing)
Validator Commission: As mentioned above, there is often a reason for commissions, but these can quickly eat your gainz.
Uptime: Honestly, most of the validators keep their uptime at 100%, so I would personally ignore those with less than 100%.
2) BORROW UST WITH bLUNA ON ANCHOR (High APY, High Risk!)
Honestly, I could write a whole novel on Anchor Protocol as its so amazing. However, the point here is to focus on LUNA gainz, and as such the strategy here is to lock your LUNA in Anchor Protocol as collateral to borrow UST. You will receive bonded Luna tokens (bLUNA) in return which lets you keep exposure to the LUNA price action while providing UST to use in whatever DeFi protocol you want. I am not going to go into detail as to what you can do but you can definitely make some crazy APYs.
Additionally, ANC tokens are being rewarded to borrowed positions, in addition to the borrowed UST. The % reward is currently 40% of the deposited LUNA, which is astronomical.
However, the big downside of this is that your bonded position is at risk of liquidation. See my article here on the April 2021 crash that lead to many Terra Fans to get REKT and how this will be avoided by the Nexus Protocol automation protocol coming soon the near, stay tuned!!
3) PROVIDE LIQUIDITY ON TERRASWAP
Another way of making extra gains on your HODLed LUNA is by providing LUNA and either bLUNA, UST, KRT, MNT, SDT to a TerraSwap Liquidity pool.
The problem with Liquidity Pools is that they will not let you capitalize on any large price action of LUNA due to impermanent loss. This is unless you compound your bLUNA from Anchor by providing tokens in the LUNA-bLUNA liquidity pool. These tokens are basically pegged to each other as one represents the Anchor bond of the other.
This article indicates a whooping 30% APY on this LP, while keeping the risk of impermanent loss at a minimum. I have personally not done this but shout out to anyone who has!
TerraSwap does not directly give you APY of the liquidity pools which is very annoying as I cannot confirm the validity of the article above. However, someone on reddit suggested using Apeboard to calculate the APY of your Terraswap LP tokens. Apeboard is a really cool way of keeping an eye on your Terra asset worth as it puts it all together for you, all you need to do is put your address in.
4) DeFi wLUNA IN ETHERIUM AND BSC
Now, why would you look elsewhere when you have the most functional DeFi opportunities in Terra? Well, some DeFi degenerates out there have tons of experience with other ETH/BSC protocols and can't be arsed with learning a new one, so why not keep exposure to LUNA while making it work in other places?
Terra has introduced the Terra Bridge which lets you transfer both LUNA and UST across the BSC, Etherium and Harmony networks. Doing this will get you wLUNA (wrapped Luna) which can then be used elsewhere...don't ask me though, im 100% Lunatic.
Well folks, that's all I have to say about this. I have written a lot about Terra on my blog.
Other articles by yours truly:
FOR TERRA FANS | Step-by-step: How to swap your BUSD, USDT or USDC into Terra UST
FOR TERRA FANS | $MINE Tokenomics | Bullish or Bearish...?
FOR TERRA FANS | Pylon Gateway Explained | + link to best resources
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Does FIAT Inflation lead to Crypto Adoption? 128 countries compared!
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