Terra Classic (LUNC), the cryptocurrency released after the Terra ecosystem crash in May 2022 has been through several ups and downs over the past few months.
Its founder Do Kwon currently has an international warrant for his arrest issued by Interpol and is currently on the run.
This, combined with several other factors has affected the price of LUNC, bringing it high and low in a rollercoaster ride since launch.
The latest of these factors is a Twitter thread from Changpeng 'CZ' Zhao, the CEO of Binance (the world's largest crypto exchange) earlier today. In this tweet, Zhao explains the steps the exchange is likely to take regarding the issue of the LUNC burn mechanism, and why.
On Friday, 23rd of September after Zhao's "ask me anything session" about how Binance plans to support the LUNC community's requests for tax burns, a number of discussions emerged as to how Binance aims to make this happen.
Initially, Zhao made it public that Binance will support the Terra Classic community. According to the CEO, Binance planned to support the 1.2% tax burns on deposit and withdrawal trading fees. However, Binance refused to implement the 1.2% tax burn for on-chain transactions on LUNC, including spot and margin trading.
After disapproval from the LUNC community, Zhao explained in a tweet earlier today, that Binance has agreed to indeed start burning all trading fees collected on LUNC/BUSD and LUNC/USDT on spot and margin trading pairs. Fees collected this way will be converted to LUNC and then sent to a burn address.
Zhao also adds that this burn will be at Binance's expense and not at the users', stating that this way, the crypto exchange can be fair to all users, stabilizing the trading experience and liquidity as well as allowing Binance to still contribute to the supply decrease of Terra Classic
Right after Zhao's AMA session on how to handle the tax burns, the price of LUNC fell about 11%, hitting $0.00025 in a single hour after Zhao stated that off-chain transactions like spot and margin trading wouldn't be covered by the tax burns.
This happened mainly because Binance's holdings alone, amount to about 35% of LUNC's supply.
According to laws of demand and supply, the price of an asset (LUNC in this case) depends largely on how much of it is in the market.
By this metric, things didn't look so good for Terra Classic. The cryptocurrency currently has a total supply of 6.9 trillion Terra classic coins and a circulating supply of 6.1 trillion tokens.
This oversaturation of Terra Classic tokens has had an effect on its price, and the tax burn aims to fix this.
With a reduced supply, the LUNC token has a chance of increasing significantly in price. So far, billions of LUNC coins have been burned and more will be burned in the coming decades.
Before the LUNA crash in May, there were 350 million tokens in circulation. The Terra Classic burn mechanism aims to burn about 260 million coins a day, and will only stop when the supply of Terra Classic reaches $10 billion.
If the Terra Classic tax burn continues at this rate, it is possible that its total supply one day reaches what LUNA once was.
However, for context, this is only likely to happen at this rate, 72 years from now.
Following Zhao's tweet concerning the LUNC burn earlier today, the price of LUNC has moved up by 36.94% today alone, and its trading volume has moved up by a whopping 371.4% in the last 24 hours.
LUNC is currently consolidating around the $0.00032 level and may see further price movement upwards, or a market correction.
The medium-term RSI also shows a level 0f 62, indicating that the coin is slightly oversold, and may experience a market reversal.
the RSI signal line is way above the MACD and may suggest that the price of LUNC is headed for a correction before long.
Disclaimer: The author's comments and recommendations are solely for educational and informative purposes. They do not represent any financial or investment advice. Always DYOR (do your own research)