Markets continue to drop and so is Luna price. Yet why would I be so bullish on Luna. We will look at some key points that makes LUNA very bullish.
LUNA is Deflationary
About a little over 1.4 million LUNA tokens are being burned everyday to create UST tokens. This is not always the case as each day the demand of UST is different, however since we are in a cryptocurrency bear market the demand for stable tokens including UST has risen. This has cause an accelerated pace of LUNA tokens being burned. Total LUNA is now under 780 million.
Amount of LUNA being staked is now over 40% and making it the second highest staked token in market cap, surpassing ETH.
This brings stability in LUNA price and stronger validation as more LUNA gets staked. In addition this makes for liquid circulation supply of LUNA to be a lot less and only accelerating as more of the LUNA gets burned into UST.
With only around 105.7 million LUNA liquid and continue to reduce on a daily basis it is making the token more scarce. In a supply and demand equation with supply reducing and even if demand remains the same than LUNA will likely continue to rise in value.
Over on Anchor Protocol there is now over 9 billion UST staked. Then there is the market cap of UST flipping up to 14th overall and now at 13.8 billion.
So the opposite side of LUNA in UST it is also heavily staked and increasing in quantities. LUNA and UST work inversely where the more UST there is the less LUNA there is.
Terra Chain Expansion
Out of the chains total value locked Terra is ranked a far second from ETH, but it has risen to second pretty swiftly. The growth of Terra is only beginning as more protocols come on line and more chains are integrating UST / LUNA onto their platforms. As of now only 21 protocols are live on Terra. While ETH having years in the space and leading with 559 protocols, more than 20x that of Terra, ETH has a massive lead in projects. Yet the TVL between the two is only 6x. There is great potential for further growth in Terra as more protocols come online, and making LUNA worth more.
Burn NOT only for UST
As of now since US dollar is the reserve currency of the world the need to hold UST as a stable asset is high. But burning LUNA for UST is only one option users can do. LUNA can be burned for many other cryptocurrencies and with each being pegged to their respective fiat currency or even cryptocurrency such as BTC. This is the relationship LUNA and other tokens have when it comes to the Terra network. Imagine as more people adopt LUNA they may want to burn LUNA for other stable coins besides UST. That will only reduce the LUNA supply even more ;)
Conclusions
I end this post with an example to think through. Let say LUNA market cap is literally capped at $30 billion for the foreseeable future. Whether its due to a difficult bear market or simply not enough buying to push the market cap higher you would think holding LUNA is not a good investment. Yet we talked earlier the facts are LUNA is a deflationary token. So even if market cap is stuck at $30 billion if the token supply continues to get burned rapidly to create UST then there is more $ for the remaining LUNA tokens.
Assuming for easy arithmetic there are 200 million LUNA tokens for $30 billion market cap which equates to $150 per LUNA. If the supply of LUNA gets burned down to 100 million but the market cap remains $30 billion that means each LUNA is now worth $300. No matter the market cap moves up or stays flat LUNA can continue to increase in value.
None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!
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