In an effort to bring back the failed Terra Luna, the approved proposal will destroy 1.2% of every transaction to reduce supply.
Luna classic (LUNC), the renamed native token of the Terra blockchain that crashed in a big way in May, is going up in price as traders bet that a rule that will be put into place soon will give the much-maligned token a second chance.
Messari, a crypto intelligence platform, says that the price of LUNC has gone up 22% in the last 24 hours and has doubled in a week. Still, the token can be bought and sold for 0.00052 cents, which is a drop of more than 99.99% since the beginning of the year.
The rally is probably being fueled by a “tax burn” system that aims to reduce the token’s overinflated supply.
The community agreed to a plan that taxes every transaction on the blockchain at a rate of 1.2%. According to the proposal, the “tax” will be sent automatically to a wallet where the tokens will be destroyed (burned) to slowly bring down the number of LUNC tokens in circulation. A statement from Binance, the world’s largest cryptocurrency exchange by volume, says that the new fee rate will start on September 20.
A member of the Terra governance forum said that the rate can’t be forced on centralized exchanges where the token is traded, but some exchanges, such as MEXC, will adopt the fee on their own.
Binance also said Thursday that it will start letting people trade LUNC against Tether’s USDT starting Friday.
But the price increase might not last long, says Edward Moya, a senior market analyst at Oanda. This is because the new fee parameter is not likely to bring in new investors to the blockchain. “It’s still a hard time for crypto in general, and investors still have a bad taste in their mouths from Terra’s crash earlier this year,” he said.
Howard Greenberg, a cryptocurrency teacher at the Prosper Trading Academy, said, “This is a pure speculation play, and at this point, it pretty much turns LUNC into a meme coin.”
“It will be a very risky trade, so if you decide to make it, make sure you have a plan for getting out if the trade goes up or down.”
The implosion of the Terra blockchain in May, which cost billions of dollars, was the start of the current crypto crisis and caused many crypto lenders and investment firms to go bankrupt. The algorithmic stablecoin for the network, terraUSD (formerly UST), lost its link to the dollar. This caused LUNC (formerly LUNA), which was supposed to stabilize the stablecoin, to go into hyperinflation. There are almost 7 trillion LUNC tokens in circulation right now, and the new burn won’t change that much about the way the coin works.
The network has lost most of its developers and investors. Those who chose to stay made a copy of the Terra blockchain so that the ecosystem could get a fresh start. The old blockchain is still working and is now called Terra Classic. It is where the stablecoin USTC and its sister token LUNC are kept.
