Terra Classic Cryptocurrency (LUNC), a native Terra blockchain token with a new name, is skyrocketing in value. The traders involved in the rally probably believe that the excitement surrounding the new token burning mechanism and staking service may breathe new life into the long-suffering token.

The LUNC token is showing growth far more intensely than all the leading cryptocurrencies, with its price doubling in the first week of September alone and a total of more than 400% growth over the month. Investors do not seem to be bothered by the coin's associations with the May collapse of the Terra ecosystem, which was the catalyst for a bearish period in the crypto market. Terra Classic is the original Terra blockchain that became a separate brand in the market, while the coin of the officially relaunched project after its collapse was the fork Terra 2.0, which retained its original LUNA ticker.

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The rise in LUNC is attributed to the approved proposal to burn 1,2% of the transaction amount as a so-called “tax” each time tokens are transferred on the blockchain. According to the idea of the proposal, the “tax” would be automatically sent to the address to burn the cryptocurrency, which would significantly reduce its amount in circulation. The widespread awareness campaign around Terra Classic's “fundamental” news seems to outweigh the cryptocurrency community's initial skepticism. Thanks to active purchases, LUNC made it into the top 30 cryptocurrencies by market capitalization.

Nevertheless, analysts are of the opinion that the growth of the price will be short-term, and technical changes will hardly attract new investors. According to Vladislav Utushkin, founder of TOTHEMOON Group, Terra Classic is a “typical junk asset” at the moment.

“After a 99% drop in value and no positive news in the past months, the new patch that made the token deflationary and restored the ability to stake, accelerated the price by almost 500% in less than a month. In absolute numbers, things don't look so happy: the difference in dollars during that time was only $0,00042 per token,” the expert says. In such a situation, the coin is highly susceptible to manipulation by big players and it is quite difficult to make long-term predictions about it. According to Utushkin, one thing is certain: in the near future, LUNC will not return to its March values, and there is no hope to restore the reputation of the cryptocurrency and its former positions.

The upgraded Terra Classic staking service was launched on August 27. As of September 9, there are 610 billion LUNC in staking, while the total supply is 6,9 trillion tokens. In other words, about 9% of LUNC has been taken out of circulation by being placed in the contract for staking. According to StakingRewards, LUNC staking yields 37,7% annually, one of the industry's highest yields, and probably also acts as a driver for demand for LUNC.

Support from exchanges

Leading exchanges on which LUNC is trading have issued statements of support for the token-burning mechanism. According to a statement from Binance, deposits to the account balance and withdrawal transactions will be “taxed,” in addition to exchange fees. Spot and margin transactions with LUNC, as well as other exchange services will continue to operate without additional fees.

Amid the excitement around the growth of LUNC, similar statements were made by other exchanges, including MEXC, Huobi and KuCoin. At the latter, the trading volume in LUNC briefly exceeded the turnover in bitcoin (BTC), and at some point there were almost no tokens left on the exchange to secure margin positions. KuCoin head Johnny Lyu wrote on Twitter that spot trading was not affected, adding that “things are getting a bit crazy lately.”

Well, "sold out" is not accurate expression here. The notice is about total #LUNC holdings reaching limit in #KuCoin margin trading. Spot trading won't be affected, you can still buy and sell LUNC on KuCoin.But yes things are getting a bit crazy lately. 😮 https://t.co/dXQG2SpU6l— Johnny_KuCoin (@lyu_johnny) September 7, 2022

As for Terra Classic's investment appeal, the token can be safely regarded as a speculative high-margin and high-risk asset, Utushkin believes. According to the expert, in the near future, the value of LUNC will be subject to the same dramatic changes, both upward and downward. “It can be recommended either to experienced speculators who are well aware of what they are doing, or to thrill-seekers who are ready to lose most of their portfolio on the deal,” warns the founder of TOTHEMOON.

The multi-billion-dollar collapse of the Terra ecosystem in May triggered a period of crypto winter and led to bankruptcy and insolvency for a lot of lending and investment companies that were considered to be at the forefront of the crypto market. At the time, the TerraUSD (UST) algorithmic stablecoin lost its peg to the US dollar, leading to the hyperinflation of the LUNC (then LUNA) token, which served as collateral for UST (now USTC). In an attempt to restart the project, many developers and investors abandoned the development of the original blockchain, releasing the Terra 2.0 fork, but even its launch was accompanied by scandals and uncovered manipulation.

Terra founder Do Kwon and his company Terraform Labs (TFL) are still under several investigations, accompanied by searches and lawsuits.