The Luna collapse can and will be described in finance books as a hyperinflationary event. But why is this exactly?
After the Luna crash and the permanent wipe-out of plenty of crypto enthusiasts on 11 May. We’ve witnessed a remarkable phenomenon.
What happened to the price of Luna Classic?
As Luna’s only purpose was to help maintain the peg of ‘stablecoin’ UST, either through minting more, or burning Luna. After the peg of UST was destroyed, Luna was minted into oblivion, making its supply unlimited.
What followed was that the supply kept growing and the price of Luna Classic trended asymptotically towards 0 but never really hit 0. Luna’s price went from $100, $10, $1, $0.10, $0.01, $0.001, $0.0001.
If you were to own 100% of LUNA supply, you would own, three days later, less than 5%. The next day it could be 0.05% and so on. This is what hyperinflation looks like.
After the validators turned off the minting of Luna, the damage was already done.
“Parabolic curve of the supply increase”
What will happen with the price of Luna Classic?
Now that Luna Classic is back listed on several exchanges, there are two possible scenarios.
#1The peg of UST is retained, which is highly unlikable, because each pump will be sold off, by rekt holders. Stabilizing the price of Luna Classic and a possible increase.
#2 No one decides to buy it anymore, resulting in that the liquidity dries up and Luna gets back delisted, fading it out of our existence.
Bottom Line
Do never buy or hold a coin that does not have maximum supply and no max issuance. Because you can and will get hyperinflated even faster than you can sell. Resulting in price decline by 99% times infinitely.
