Does NEAR risk suffering the same death spiral fate as LUNA?


The LUNA and UST conflict shifted the spotlight for other crypto projects running decentralized stablecoins like NEAR’s USN. The latter is one of the fastest growing blockchain networks. However, many investors seem to be questioning whether its growth trajectory will suffer the same fate as Terra.

Let’s evaluate the differences and similarities between the two blockchain projects. The two projects are similar in that they need to balance their pegs through a stablecoin supply. They also issue stablecoins using the native cryptocurrency of the blockchain. While Terra uses the mint and burn mechanism, NEAR uses the Treasury to keep the dollar pegged.

Is NEAR’s approach safer?

NEAR is locked to the Treasury to issue USNs and will be unlocked when USNs are burned. It’s also worth noting that NEAR’s supply is fixed and this is one of the solutions deployed to avoid oversupply that could lead to a death vortex.

NEAR also goes a step further by ensuring that the Treasury is heavily collateralized and backed by NEAR and USDT. This is guaranteed through a pool of REF finance and centralized exchanges.

Are there any risks with NEAR’s approach?

Although NEAR’s USN approach appears to be more secure than Terra’s UST approach, it is still not as secure as a fiat-backed centralized stablecoin. The USN has shown significant volatility recently, but is still recovering its peg. There are also concerns that USDT is part of an over-collateralization mechanism. There is a glimmer of possibility that USDT unpegging will de-peggize the USN.

NEAR peaked at $20.59 in January 2022, but has received a significant discount over the past few months due to bearish market conditions. At the time of writing, it was trading at $5.87. And at the time of writing, they are set to form a death cross, suggesting more potential downsides.

Source: TradingView

The price movement shows that the total supply of NEAR held by whales has decreased over the past 30 days. However, over the past three days, whales have shown signs of accumulation, suggesting that the NEAR may experience more ascent.

NEAR Protocol NEAR 14.22.24 24 May 2022

Source: Santiment

As far as long-term performance is concerned, NEAR may not be at risk of a death vortex and has expanded its offerings with Metaverse and NFT. In fact, it has registered significant NFT trading volume and notable developer activity in the last 30 days.

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