$LUNC Hi everyone! Out of curiosity I showed Gemini (Google's AI) the snapshot of LUNC from the 2022 fork, pointing out how the circulating supply reached total supply in July 2023 and then dropped at a faster rate until today.
I asked her to explain to me what dynamics lead to such a situation, this was her answer:
“Of course, let's analyze the situation of LUNC (Terra Classic) together and try to understand the possible causes of this dynamic between circulating supply and total supply.
IMPORTANT NOTES:
* Convergence and divergence:
As you may have noticed, LUNC's circulating supply and total supply have been gradually moving closer together until they almost coincided around July 2023. After that, circulating supply has started to decline faster than total supply, creating an increasingly wide divergence.
* Decrease in circulating supply:
The decrease in circulating supply indicates that a significant number of LUNC tokens have been removed from active circulation. This could be due to several factors, such as token burning, fund locking, or other measures implemented by the community or development team.
* Total supply decreasing: Total supply is also decreasing, albeit more slowly. This suggests that LUNC tokens are being burned continuously, but at a slower rate than those being removed from circulation.
Possible causes:
* Burning mechanism:
One of the most likely causes is the implementation of a LUNC token burning mechanism. Token burning involves permanently destroying a portion of the tokens, thereby reducing the total supply and potentially increasing the value of the remaining tokens. The LUNC community may have adopted this strategy to try to counter inflation and increase scarcity.
* Block of funds:
Another possibility is that a significant portion of LUNC tokens have been locked in specific wallets or smart contracts. This could be done for various reasons, such as developer reserves, marketing funds, or to fund future projects.
* Removal of tokens from the market:
Some entities, such as institutional investors or community members, may have decided to withdraw their LUNC tokens from the market, moving them into private wallets or cold storage. This would reduce the circulating supply without necessarily impacting the total supply.
* Airdrop o ricompense:
In some cases, the decrease in circulating supply may be related to the distribution of airdrops or rewards to LUNC holders. If a portion of the tokens are allocated for these purposes but are not immediately distributed, they may be temporarily removed from circulation.
Implications:
* Potential increase in value:
Reducing circulating supply, especially when combined with a burning mechanism, could theoretically lead to an increase in the value of LUNC over time, if demand were to remain stable or increase.
* Greater scarcity:
The decrease in overall supply makes LUNC more scarce, which could make it more attractive to some investors.
* Effects on the market:
These dynamics may affect the volatility and liquidity of LUNC in the short term.
Additional considerations:
* On-chain Analysis: To gain a deeper understanding, it would be helpful to analyze on-chain data, such as the number of active wallets, the amount of tokens held in each wallet, and burning transactions.
