LUNA Price Action

    What accounts for the increasing LUNA price?

    Findings & Conclusion

    We can see that increasing UST in circulation is inversely proportional to LUNA circulation. This affirms what's in Terra docs that LUNA is burnt to mint new stablecoins. The burning of LUNA contracts its supply which causes an increase in price.

    Therefore, the main drivers of LUNA's surge in price are:

    • LUNA burn to mint new stablecoins
    • LUNA buyback causing an increase in demand

    LUNA

    Looking at liquid LUNA in circulation, total volumes dropped from 1.0 billion to 0.9 billion in early July 2021.

    UST

    The chart below shows the circulating supply of UST in Terra wallets outside of smart contracts. Looking at the volume since July 2021, it increased from 1.9 billion to 2.4 billion which represents 20.8%.

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    Method

    We shall verify whether LUNA price action truly aligns with the theory of the whitepaper. We will analyze UST and LUNA volumes in circulation over time.

    This dashboard seeks to find out what's behind LUNA's surge in price. We know that like every money market, LUNA adheres to the rules of demand and supply. According to the Terra whitepaper, for every unit of stablecoin minted, the same amount of LUNA is burned. This process is called seignorage, and this is how Terra stablecoins maintain price stability.

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    Introduction

    LUNA price has been on a bull run since July 2021 as the chart below shows.