Crypto Terra Luna Classic Surges as Traders Speculate on New Supply Burn Rule

Luna clas­sic (LUNC), the renamed native token of the Ter­ra blockchain that dra­mat­i­cal­ly implod­ed in May, is ris­ing in val­ue as traders bet that a soon-to-be imple­ment­ed rule may breathe some life into the much-maligned token.

LUNC gained 22% in the past 24 hours, and dou­bled its price in a week, accord­ing to data by cryp­to intel­li­gence plat­form Mes­sari. Still, the token is chang­ing hands at a frac­tion of a cent ($0.00052 to be pre­cise) and it is down more than 99.99% since the start of the year.

A “tax burn” regime that aims to reduce the token’s hyper­in­flat­ed sup­ply is like­ly fuel­ing the rally.

The com­mu­ni­ty approved a pro­pos­al that intro­duces a 1.2% tax rate on every trans­ac­tion on the blockchain. Accord­ing to the pro­pos­al, the “tax” will auto­mat­i­cal­ly be sent to a wal­let to destroy (burn) the tokens to bring down grad­u­al­ly LUNC’s bloat­ed cir­cu­lat­ing sup­ply. The fee rate is expect­ed to take effect on Sept. 20, accord­ing to a state­ment from Binance, the world’s largest cryp­to exchange by volume.

The rate can­not be enforced on trad­ing the token on cen­tral­ized exchanges, as a mem­ber of the Ter­ra gov­er­nance forum point­ed out, but some exchanges such as MEXC will vol­un­tar­i­ly adopt the fee.

Binance also announced Thurs­day that it will add LUNC trad­ing against Teth­er’s USDT to its trad­ing pair list, start­ing Friday.

How­ev­er, the price rise may prove to be short-lived as the new fee para­me­ter is unlike­ly to attract new investors to the blockchain, accord­ing to Edward Moya, senior mar­ket ana­lyst at Oan­da. “It still remains a tough peri­od for cryp­to in gen­er­al and investors still have a bad Ter­ra taste in their mouth from the col­lapse ear­li­er in the year,” he told CoinDesk.

Howard Green­berg, cryp­tocur­ren­cy edu­ca­tor at Pros­per Trad­ing Acad­e­my, said that “this is a total spec­u­la­tion play and basi­cal­ly turns LUNC into a meme coin at this point.”

“It will be a very volatile trade, and if some­one choos­es to enter the trade I would make sure you have an exit plan for both down­side and upside.”

Story continues

The Ter­ra blockchain’s multi­bil­lion-dol­lar implo­sion in May was the epi­cen­ter of the cur­rent cryp­to cri­sis and led to the insol­ven­cy of mul­ti­ple cryp­to lenders and invest­ment firms. The network’s algo­rith­mic sta­ble­coin, ter­raUSD (for­mer­ly UST), lost its peg to the dol­lar, and sent LUNC (for­mer­ly LUNA), which was sup­posed to sta­bi­lize the sta­ble­coin, into hyper­in­fla­tion. The cur­rent sup­ply of LUNC is near­ly 7 tril­lion tokens, and even tak­ing into account the new burn it won’t sig­nif­i­cant­ly change the coin’s fundamentals.

Most devel­op­ers and investors have left the net­work. Those who decid­ed to stay cre­at­ed a dupli­cate of the Ter­ra blockchain as part of an attempt to have a fresh start for the ecosys­tem. The old blockchain still remained func­tion­al and was rebrand­ed to Ter­ra Clas­sic, host­ing the sta­ble­coin USTC and its sis­ter token LUNC.

Read more: Luna (LUNA) vs. Luna Clas­sic (LUNC): What Is the Difference?