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The Anchor Protocol crypto price is surging by nearly 28% in the past 24 hours according to data from CoinMarketCap making this the second consecutive day of strong gains for the Terra-powered crypto savings platform.

The move coincides with a sudden uptick in the value of Terra’s both former and current native tokens – LUNA and LUNC – which are rising 14% and 22% respectively in the past 24 hours as well.

Anchor is a creation of Terraform Labs, the company that developed the Terra blockchain. The protocol works as a savings platform on which users could deposit their UST tokens – the now-demised stablecoin that powered the Terra ecosystem – to earn attractive returns.

In a Tweet published on 7 June, the Anchor Protocol’s developing team announced that Proposal 29 was passed by the community. The proposal limits the Earn and Borrow functionalities of the protocol temporarily to prevent further attacks except for deposits and withdrawals.

The volatile trading of these Terra-related tokens was prompted by reports that the project’s parent company is under investigation by the US Securities and Exchange Commission to see if laws were violated as to how the tokens were marketed to retail investors.

Approximately $60 billion were lost as a result of the collapse of Terra’s UST and LUNA tokens. The incident was partially enabled by the Anchor Protocol as traders managed to borrow significant amounts from the DeFi app to then used the algorithmic’s stablecoin mint-and-burn mechanisms to its own detriment.

The Role of Anchor in Terra’s Demise

The reason why the main functions of the Anchor Protocol have been deactivated is that the app contributed its fair share to the collapse of the Terra ecosystem.

Via Anchor, traders could borrow money by using UST as collateral and savers were paid returns of over 20% for depositing their money.

At some point, when the price of UST drifted off its peg, many traders engaged in arbitrage and borrowed sizable amounts of UST that were then redeemed in LUNA at a $1 parity.

This resulted in the collapse of the native token of the Terra ecosystem as supply grew unstoppably to its current levels. According to CoinMarketCap, there are 6.54 trillion Luna Classic (LUNC) tokens in circulation at the moment.

Thus far, there have been no official announcements regarding the migration of the Anchor Protocol to the new Terra 2.0 network. Activity on Twitter has been limited to announcements concerning Proposal 29 and nothing else.

Anchor Protocol Price – Technical Analysis & Predictions

anchor protocol price chart
ANC/USD price chart (KuCoin) – Source: TradingView

Despite this recent two-day uptick, the Anchor Protocol price is still standing 97% below its 52-week high and 93% below its 200-day simple moving average. This emphasizes the significant weakness of the token from a technical perspective.

The future of the token is largely tied to the success of the Terra network. Since the protocol has not migrated to Terra 2.0 and, considering the fact that efforts to push UST back to its $1 peg have ceased, it is hard to imagine a scenario in which Anchor returns to its former glory.

For now, the 6 cents level remains a key horizontal support to watch. Momentum indicators remain bearish as the Relative Strength Index (RSI) is standing at 36 while the MACD is still neck-deep into negative territory despite the indicator rising in the past few days.

According to estimates from Wallet Investor, the short-term outlook for the token is a bit volatile as the trading range is expected to be between $0.08 (negative) and $0.26 per coin (positive).

As for the mid to long-term, the price of the Anchor Protocol token is expected to decline to 2 cents in the foreseeable future resulting in an 86% drop compared to today’s price.

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