Everything You Need to Know About the Terra Classic (LUNC) Tax Burn
Lately, Binance announced that it would support the LUNC burns via a "burn mechanism" in which the crypto exchange burns all trading fees collected on spot and margin trades.
Soon after that, the price of LUNC exploded to the upside in a 56% upswing.
However, while LUNC appears bullish in the short and medium terms, the cryptocurrency now appears to be forming a bearish head and shoulders pattern from a long-term perspective.
LUNC in the Charts
Right after the bullish 56% move when Binance announced its support for the burns, the price of LUNC hit a high of $0.00336. However, LUNC has begun to trend downwards now and appears to be aiming for a retest of the support zone around the $0.00018 zone.
As illustrated above, the price action of LUNC appears to have formed a head and shoulders pattern. This pattern can be interpreted as a bearish formation and may forecast a 25% downtrend if the bears stay in control.
The price action of LUNC appears to be aiming for a retest of the support around $0.00020. The price of LUNC has also declined more than 20% from the high that formed its right shoulder on October 10.
Going forward, if the support level around the $0.00021 – $0.00020 zone fails to hold, investors and traders alike can expect a massive selloff to the support zones between $0.000176 (purple line) to $0.000142.
If this decline to the $0.000142 zone happens, the drop from LUNC's right shoulder would have amounted to a 50% dip and is likely where the bears will meet the most resistance from the bulls.
On-chain Transaction Volume Spikes
The tax burn rate on On-chain transactions for LUNC and USTC has been reduced from 1.2% to 0.2%. This came into effect following over 5,200 proposals to this end.
So far, several crypto exchanges have agreed to support this new tax burn rate and have even begun to choose the best ways to implement the burns.
In response to this decision by the Terra community to reduce the Tax Burn rates, the 23-hour trading volumes on both USTC and LUNC exploded.
According to a tweet from a crypto YouTuber with the Twitter username "ClassyCrypto", the trading volume on LUNC doubled in a single day after the tax burn reduction.
Coupled with the percentage tax burn reduction, 10% of the collected seigniorage gets added to the community pool at the end of the epoch.
Edward Kim, the co-author of the original proposal that suggested the reduction, has recently explained that the reduction of the percentage tax burn from 1.2% to 0.2% and allocating 10% of the seigniorage to the liquidity pools for development purposes will be helpful because these funds in the liquidity pool can be used as emergency funds in many projects.
Some of these projects include attracting more Dapps and projects to the Terra chain and paying the developers to scale up the network.
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