Alejandro Arrieche
The price of the native cryptocurrency of the original Terra network – Luna Classic (LUNC) – has kept rising today, accumulating gains of nearly 300% in the past 30 days as news concerning the implementation of a transaction tax continue to circulate.
LUNC lost around 99.9% of its value in a matter of days back in May this year after the Terra ecosystem imploded due to a series of events that started with the de-pegging of its flagship stablecoin UST.
Approximately $60 billion evaporated in the blink of an eye while the developing team behind the crypto project – Terraform Labs (TFL) – did little to protect the ecosystem from collapsing.
Shortly afterward, TFL proposed the creation of a new Terra network and renamed the tokens of its failed predecessor by adding the word “Classic” to their original designations.
However, a group formed by some of the investors who lost a ton of money as a result of the incident and speculators who are looking to make a quick buck are advocating for a massive token burn that could shrink Luna Classic’s rather large circulating supply to the point that the token can rise significantly in a relatively short period.
LUNC Cryptocurrency Burn Proposal Gains Traction
The most popular proposal to achieve this is the implementation of a 1.2% tax on all transactions paid in LUNC and burned immediately to progressively reduce the token’s circulating supply.
The proposal has been endorsed by some of the most prominent validators that continue to keep the original Terra network working. One of these validators is Twitter user @LUNCDAO. This party has been attracting Luna Classic (LUNC) holders to stake their tokens so it can gain a higher percentage of participation in the network to vote in favor of the 1.2% tax proposal.
The $LUNC staking upgrade happens in 3 hours, our $LUNC validator fires up and we start burning
In this video we tell you everything you need to know about $LUNC Staking + answer every all questions
RT so everyone in the $LUNC community has full infohttps://t.co/wEnM5zC6ue
— ℕℂ (@LUNCDAO) August 26, 2022
The community has been working around the clock to shape how the implementation of this tax would work in practice. On 31 August, what could be considered the most serious proposal in technical terms appears to have been drafted by Edward Kim, a member of the Terra Classic community.
According to Kim’s post in the Terra Classic public forum, the tax can only be applied to on-chain transactions, meaning that top centralized exchanges may not enforce it as most of the operations that take place within their platforms are done off-chain.
Data from CoinMarketCap shows that most of the trading of Luna Classic occurs within CEXs and that is one of the reasons to believe that the tax may fail in significantly reducing the circulating supply of Luna Classic.
Meanwhile, Binance recently stated that it will be shutting down the bridge that allows users to trade LUNC by using the Ethereum and BNB Smart Chain networks. Effective on 7 September, LUNC may only be traded by using the Terra Classic network – a potentially costlier alternative than the former.
Trading Volume for Luna Classic Surges to Over $2 Billion in 24 Hours
Despite the low odds that LUNC can make comeback, speculators have kept pouring money into the digital asset as indicated by today’s trading activity. In the past 24 hours, the price of LUNC has risen 21.6% to $0.0003892 with trading volumes surging by 211% during that same period.
A total of $2.76 billion worth of LUNC have exchanged hands in the past 24 hours, making it the 7th most traded asset during that same period as per data from CMC.
Whether the 1.2% tax can make LUNC valuable once again, possibly reaching the $1 threshold that many are advertising as a real possibility, the odds are virtually zero. If the token reaches that price, its market capitalization would rise to over $6 trillion.
Even if the circulating supply is cut by half somehow, the market cap would still have to rise to $3 trillion at least, surpassing by around three times the entire value of all cryptocurrencies.
This does not mean that money cannot be made with LUNC if demand for the token keeps rising shortly as a result of this wave of positive momentum. However, realistically, the value of the token may never come anywhere close to $1.
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This article was written for Business 2 Community by Alejandro Arrieche.
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