1. Introduction
As generally known, the price of an asset is determined by its network effects. These effects are the demand and supply forces that act to send the prices soaring or bring them down. For $LUNA price to increase, there has to be a large demand with very little supply to meet such demand.
For some assets, network users are relied on to create demand. However, for $LUNA, there's an intrinsic function to create scarcity (increasing demand). This concept is also known as scarcity dynamics. $LUNA as an elastic (also reserve) currency is burnt or minted to maintain the stability of Terra's stablecoins. For $LUNA price to increase, more $LUNA has to be burnt rather than minted to create scarcity. Therefore, the stablecoin market cap, which is a product of $LUNA burn is a direct correlation of $LUNA price.
2. Stablecoin Market
Terra's biggest export is the stablecoin, which also in turn captures value for $LUNA. So as $UST and other stablecoins find utility in defi projects and other chains like solana, BSC, etc, more $LUNA is burnt creating scarcity which increases its market price. The graph below presents the market cap of Terra stablecoins and as we can see, the market cap is increasing steeply across the board.
3. 3-Month Moving Average
Now, we know that the stablecoin market cap is rising, but is $LUNA price really rising, and when will it reach $100? In this section, we employ the 3-month moving average to analyze $LUNA price. If the price stays above the moving average, then we have an uptrend; if it stays below the moving average, then we have a downtrend. We can see that the price stays above the moving average so we are in an uptrend.