Excitement surrounding Terra Classic staking service and new token burn feature fuels LUNC rally.
Terra Classic (LUNC) outperformed all of the most popular cryptocurrencies in September, gaining almost 100% in the past seven days.
Terra Classic outperforms the crypto market
The token is up over 250% since the beginning of the month, hitting $0.000594 on September 8th, its best ever. While Bitcoin (BTC) fell 4% over the same period and Ether (ETH) gained just 3.5%.
Gains in the Terra Classic market came despite its association with the defunct Terra (LUNA) token, a $40 billion project that collapsed in May. Terra Classic is a rebranded version of the same Terra project, which is why it has drawn skepticism from analysts and investors since its debut.
But traders have shrugged off such warnings over the past few weeks, as a number of fundamental catalysts prompted them to buy LUNC.
staking service
On August 27th, a new betting service was launched on the Terra Classic network, serving as the first major signal for the ongoing LUNC price rally.
According to LuncStaking_Bot, users have staking over 610 billion LUNCs on Terra Classic with a net supply of 6.9 trillion units. In other words, nearly 9% of LUNC’s total offering has been phased out.
StakingRewards data shows that staking Terra Classic users yields an annual return of 37.8%, one of the highest payout rates in the crypto industry.
Higher yields may have played a key role in driving demand for LUNC, boosting the token’s price by over 450% since the staking service launched, as illustrated in the chart below.
Daily LUNC/USD chart. Source: Trade View
Burning LUNC tokens
In addition to staking, Terra Classic developers also introduced a token burn mechanism to increase LUNC scarcity.
Edward Kim, a member of the Terra Classic community, proposed introducing a 1.2% transaction tax on LUNC transactions on the network in early September. The proceeds associated with this tax will eventually be dormant, resulting in some of LUNC’s shipments being permanently phased out.
Interestingly, according to LUNC Burner, there is already a LUNC burning mechanism that has permanently retired over 3.6 billion tokens.
Great risk of accidents ahead
However, some technical indicators show that LUNC’s price rally could correct in the near future. These include the daily Relative Strength Index (RSI), which surpassed 90 on September 8th, an extremely overbought level that is usually followed by a price correction.
Daily LUNC/USD chart. Source: Trade View
Moreover, LUNC’s recent surge is accompanied by lower volume, suggesting that traders are not confident in the durability of the price rally.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Cointelegraph.com. Every step of investing and trading involves risk, you should do your own research when making a decision.
