Terra’s Largest DeFi Platform Just Cut Yield Rates, Here’s Why:

Published by

Anchor Protocol, the largest DeFi platform on Terra, recently reduced its annual yield rates in a bid to improve the platform’s sustainability. The move comes after users approved a proposal in March to introduce dynamic interest rates.

Starting from May 1, the platform now offers a 18% annual return on investments, down from the nearly 20% offered earlier. The 20% yield was pivotal in driving traders into Anchor, and saw its total value (TVL) double this year. TVL now stands at a near record high of $16.6 billion.

But while Anchor’s TVL was unaffected by the rate cut, the platform’s governance token, ANC, slumped as much as 15% in reaction to the cut. The token is now trading near two-month lows, at $1.82.

Anchor switches to dynamic rates, what does it mean?

In a bid to maintain the protocol’s stability, Anchor will now adopt dynamic interest rates based on the availability of its reserves, the protocol said on Twitter. Rates will be adjusted by up to 1.5% per month, and will move within a limit of 15% to 20%.

Rates will be adjusted based on gains and losses in Anchor’s yield reserve, the liquidity pool from which the protocol pays out yields. Sudden spikes in deposits this year had heavily pressured the reserve, requiring liquidity from Terra’s broader reserve pool.

The spike in deposits also explains why Anchor has adopted dynamic yields. The proposal to reduce lending rates was introduced earlier this year, and voted into effect

by Anchor users in March.

Terra’s DeFi value surges this year

DeFi applications on Terra have seen a surge in inflows over the past few months. The total value of DeFi projects on the blockchain recently hit a record high of $21.8 billion.

A bulk of these flows are driven by Anchor Protocol, which accounts for nearly 78% of Terra’s DeFi value thanks to its 20% yield. The protocol has also helped grow Terra’s UST stablecoin, which can be used to stake on the platform.

Over 70% of all UST supply is locked into Anchor. Still, the token recently became the third-largest stablecoin by market value.


Ambar Warrick

With more than five years of experience covering global financial markets, Ambar intends to leverage this knowledge towards the rapidly expanding world of crypto and DeFi. His interest lies chiefly in finding how geopolitical developments can impact crypto markets, and what that could mean for your bitcoin holdings. When he isn't trawling through the web for the latest breaking news, you can find him playing videogames or watching Seinfeld reruns. You can reach him at

Published by

Recent Posts

  • News

Breaking: Court Orders Liquidation Of Three Arrows Capital

Crypto hedge fund Three Arrows Capital (3AC) has reportedly plunged into liquidation, as per Sky…

June 29, 2022
  • News

This Crypto Winter Suite Could Help Investors In Bear Market

Swiss-based crypto products firm 21Shares on Wednesday said it has launched its Crypto Winter Suite…

June 29, 2022
  • News

When Will Crypto Markets Recover? Former Coinbase Exec Weighs In

Tom Loverro, a long-time crypto investor who formerly served on exchange Coinbase's board, says it…

June 29, 2022
  • News

Terra USTC Price Skyrockets By 75%; Will It Recover More?

Terra’s collapsed tokens TerraClassicUSD (USTC) and Terra Classic (LUNC) which triggered the crypto market crash…

June 29, 2022
  • News

Does Celsius Owe $174 Mln To Voyager Digital?

Nansen CEO Alex Svanevik on Wednesday revealed that Celsius received large amounts of funds from…

June 29, 2022
  • Uncategorized

As Bitcoin Goes Below $20K, Stats Show How Close Is Bottom

Amid much hype of buying the dip at current prices and market reaching its bottom…

June 29, 2022