LUNA’s Supply Drops to All-Time Lows – But Don’t Call It Deflation

Supply of LUNA, the original Terra blockchain token, fell to an all-time low on Tuesday. This prompted crypto analysts to look at how popular the project is still. Despite concerns about sustainability

LUNA’s circulating supply – i.e. the number of tokens on the market – has dropped to 346 million, down from 355 million the previous month and reaching 482 million in November, according to data from LUNA. Smart Stake The tracking platform found that – the number of coins in the market that are not locked for stake – dropped to 90 million for the first time ever.

LUNA’s Falling Supply Has Supported Token Prices In Cryptocurrency Markets It hit a record high of $119 on April 5.

Dustin Teander, analyst at Messari platform, said: “This has resulted in significant price movements for LUNA assets. Because not only is there a significant purchase. But there has also been a dramatic reduction in supply and bringing us to where we are now.””

The Terra blockchain was founded and developed by Terraform Labs in South Korea and has rapidly expanded from a payment protocol to new investments in decentralized finance (DeFi), gaming, and NFT tokens. The original Terra and UST, Stablecoin algorithms have leapt to the top of cryptocurrencies. The most efficient in 2022

The fate of LUNA’s prices is closely linked to UST, as LUNA tokens are essential to keeping Terra’s UST at $1 based on algorithmically generated pricing mechanisms. This will destroy or generate LUNA tokens to balance supply and demand for UST tokens.

When UST is above $1, LUNA is burned for mint UST. Similarly, if demand is low for UST and price is below $1, UST is burned to LUNA.

and soaring UST demand. It sent the market capitalization to $18 billion from $2 billion a year. Meanwhile, depositors flock to Anchor Protocol, a project built on Terra that yields 19.5% per year.

“To get that 20% return, people need to buy UST, which involves buying LUNA first and burning it to hold UST,” Teander said.

But even that hasn’t made LUNA a deflation asset. If demand for UST is halted and investors flee the Terra ecosystem, UST will be burned and increase LUNA’s supply.

in extreme situations A selloff on LUNA could quickly exacerbate the situation and cause UST to lose its peg and affect other parts of the cryptocurrency market. As some analysts warn

So far this year, LUNA’s prices have performed quite well at a time when most cryptocurrencies are in trouble. due to hot inflation interest rate hike And political uncertainty has led investors to sell risky assets in bitcoin.

As of January 1st, LUNA has been down only 2.8%, while bitcoin is down 18%, and several major altcoins such as solana (SOL) and cardano (ADA) have lost about 40% in value.

LUNA also jumps into the sixth largest cryptocurrency by market capitalization. and ranks fourth behind bitcoin (BTC), ether (ETH) and binance coin (BNB), excluding stablecoins, according to the cryptocurrency. CoinGecko

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