Here's Why Terra's LUNA Is Up 20% in 24 Hours

Terra's LUNA reached a new all-time high today.

Terra (LUNA) is one of the few top cryptocurrencies that's actually gained value this year. The LUNA token gained over 20% in 24 hours and is now up about 50% in the past 90 days.

Plus, Terra just reached a new all-time high at a point when many cryptocurrencies are down around 40% or more. It peaked at over $104.58, just slightly more than its previous top of $103.33, according to data from CoinMarketCap. The gain meant the popular crypto briefly moved into sixth place in the crypto charts, overtaking Ripple (XRP).

What is Terra?

Terra is a stablecoin-focused smart contract blockchain. Stablecoins are cryptocurrencies whose value is pegged to traditional assets such as the U.S. dollar. Terra has issued stablecoins in various currencies, including a dollar-pegged UST token. These tokens underpin various payment, interest generation, and trading applications, among others.

Terra's stablecoins are different from fiat-backed stablecoins like USD Coin (USDC) and Tether (USDT). These keep assets in reserve to support each token they issue. Instead, each stablecoin is backed by a pool of LUNA tokens. Terra uses algorithms to ensure its tokens retain their peg so that one UST is always worth $1. The algorithms mint or burn LUNA to raise or decrease the value of its stablecoins as necessary.

Why LUNA's up 20%

A couple of factors have contributed to Terra's 20% price increase, including significant increases in the amount of money on its blockchain. With over $26 billion, Terra is now the second biggest blockchain in terms of total value locked, according to DeFi Llama. It's up almost 20% in the past day, and almost 80% in the past month.

Here are the two biggest drivers for Terra's increase.

1. The whole market got a boost today

Biden's executive order on crypto and digital assets was well received by the market. Bitcoin's (BTC) price rose 9%, and Ethereum (ETH) gained 7%. The long-awaited order was optimistic about cryptocurrency's potential to drive innovation while also raising concerns about certain aspects of the industry.

READ MORE: Best Crypto Apps and Exchanges

2. It just added another $418 million to its reserves

At the end of February, Terra announced it had raised $1 billion in a private token sale, and it's now added even more cash to its reserves. On March 9, Terra's boss, Do Kwon, tweeted that the Luna Foundation Guard had added another $418 million to its reserves.

The February deal was led by various venture capital firms and raised funds for a UST Forex Reserve. This is essentially a way to ensure UST would keep its peg even in the face of dramatic crypto price volatility. It answers some of the criticisms around algorithmic stablecoins, as there are other algorithmic stablecoins that have not managed to maintain their value all the time.

What this means for investors

It's always risky to buy a crypto when it's just reached a new high. In crypto, highs are often followed by price drops, especially when the market is as volatile and unpredictable as it is right now. That said, Terra's moves to shore up its reserves are a welcome move, as they build confidence and stability.

As with any cryptocurrency investment, it's important to do your own research and make sure you understand the risks involved with each individual coin or token. Don't rush into buying Terra just because everybody's talking about it -- instead, take your time and make sure it fits with your financial situation and long term investment goals.