Terra Classic (LUNC)
outperformed just about every other cryptocurrency over the past 30 days. But how can that be? Just 4 months ago, the cryptocurrency and its founder, Do Kwon, were in terrible disrepute.
The token rose more than 250% over the past month, reaching a high of €0.000594 on Sept. 8. At the same time, Bitcoin
fell 4% and Ethereum
rose only 3.5%.
Terra Classic is a rebranding of the original Project Terra (LUNA)
, a project that collapsed in May. So you would expect that people would rather not burn their hands on the same project again, but the opposite appears to be true. Below you can read the three main reasons for these enormous price gains.
A new staking service went live on the Terra Classic blockchain on Aug. 27 and served as the first major catalyst behind the current LUNC price rally.
According to LuncStaking_Bot, users have staked more than 610 billion LUNC against a total supply of 6.9 trillion units. In other words, nearly 9% of the total LUNC supply has been taken out of circulation.
Data from StakingRewards shows that staking Terra Classic users earn a 37.8% annualized return, one of the highest payouts in the crypto industry.
The higher return may have played an important role in boosting demand for LUNC, which has caused the price of the token to rise by more than 450% since the launch of the staking service.
LUNC token burn
In addition to strike, Terra Classic's developers have also introduced a token burn mechanism to boost the scarcity of LUNC.
Terra Classic's community member Edward Kim proposed in early September to impose a 1.2% transaction tax on LUNC on-chain transactions. Transactions resulting from this tax would eventually end up at a dead address, permanently removing some of the LUNC supply from circulation.
Interestingly, a LUNC burning mechanism already exists that has permanently removed more than 3.6 billion tokens from circulation, according to LUNC Burner.
Ultimately, hype and FOMO (Fear Of Missing Out) may be the biggest drivers behind LUNC's price rally. The token burn and staking mechanism are designed to create scarcity, and it appears to be working. But it is advisable to check with yourself what the real value of LUNC is.
Chances are that this will end up in a pump and dump, probably putting LUNC in an even worse light than it already did. Hype and FOMO always play a big role in these kinds of immense price increases, but chances are you will lose money if that is your entry reason.
Confidence in Terra and all related projects has been gone since May, and this is unlikely to return anytime soon unless they come up with new revolutionary ideas. Therefore, this resurgence of Terra Classic is not expected to last long. There is money to be made, but the risk is also very high.