THE HYPE AROUND TERRA CLASSIC’S SERVICE AND NEW TOKEN-BURNING FEATURE FUEL THE LUNC RALLY
Terra Classic beats the crypto market
The token has risen more than 250% since the beginning of the month, reaching $0.000594 on September 8, its best-ever level. While Bitcoin (BTC) fell 4% and Ether (ETH) only gained 3.5% over the same period.
Terra Classic's market gains came despite its association with the defunct Terra Token (LUNA), a $40 billion project that collapsed in May. Terra Classic is a rebranded version of the same Terra project and has therefore been subject to skepticism from analysts and investors since its debut.
But traders have ignored those warnings in recent weeks, with a wave of fundamental catalysts influencing them to buy LUNC.
Staking out service
The Terra Classic chain launched a new betting service on August 27th, serving as the first major clue behind the ongoing LUNC price rally.
According to LuncStaking_Bot, users have staked over 610 billion LUNCs with Terra Classic against a net supply of 6.9 trillion units. In other words, almost 9% of the total supply of LUNC was withdrawn from circulation.
Data from StakingRewards shows that Terra Classic staking returns users with an annual return of 37.8%, one of the highest payouts in the crypto industry.
Higher returns may have played a key role in fueling demand for LUNC, which has driven the token's price to increase by more than 450% since the launch of the staking service, as shown in the chart below.
Burning a LUNC token
In addition to staking, the developers of Terra Classic also introduced a token burning mechanism to increase the scarcity of LUNCs.
Terra Classic community member Edward Kim proposed imposing a 1.2% transaction tax on transactions on the LUNC chain in early September. Proceedings from this tax would eventually end up at a dead end, permanently removing some of the LUNC supplies from circulation.
Interestingly, there is already a LUNC burning mechanism that has permanently removed over 3.6 billion tokens from circulation, according to LUNC Burner.
There is a great risk of a crash ahead
However, some technical indicators show that LUNC price growth is in danger of correcting in the near term. These include its daily Relative Strength Index (RSI), which crossed 90 on September 8, an extremely overbought level usually followed by a price correction.
LUNC's recent gains have also been accompanied by lower volumes, suggesting that traders are not convinced of the longevity of the price rally.
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