Stocks of Anchor, the major savings protocol for the Terra Luna ecosystem (LUNA), are down 35.7% over the past seven days, according to Terra.Engineer. Since the beginning of December, the amount of Terra USD (UST) stablecoin held at “terra1tmnqgvg567ypvsvk6rwsga3srp7e3lg6u0elp8” has decreased by more than 50%, leaving only $35.7 million.
As a savings protocol, users deposit their terrestrial treasury funds through their wallet and get a return of up to 20% as the loan principal is provided to borrowers who pay interest on the loan amount. Borrowers must provide collateral so that the lender can repay the money in the event of a default. In addition, the anchor bets on the security it receives to generate bonuses for shareholders.
When there is a shortfall between income earned from borrower interest, guarantees and repayment costs paid to depositors, the Anchor shall use the above TerraUSD (UST) reserves to make up the difference. In July last year, the creator of Terraform Labs injected 70 million UST into the standby protocol, and the cost was relatively stable. But over the past 60 days, total deposits increased from $2.3 billion to $6.1 billion, while total loans only increased from $1.2 billion to $1.5 billion.
In bear markets, investors typically abandon volatile assets in search of stable assets, such as high-yield savings protocols. However, the growing mismatch between Anchor’s deposits and loans has put severe pressure on reserves. If the trend continues, the reserves will run out in the coming months, and Terraform Labs will have to add another round of floor tanks of liquidity or sharply cut the promised rate by Anchor.