UST was not collateralized with physical dollars or other cryptocurrencies, as it was an algorithmic stablecoin. To keep the value of UST close to that of the dollar, Luna’s supply was increased or decreased as needed and a “burn” system was used to take tokens out of circulation.
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And disaster struck: demand for UST plummeted and supply for Luna rose sharply, causing LUNA price destruction.
The Terra community was so important that they decided to revive the project and renamed Luna Luna Classic, using the LUNC token.
Let’s see the evolution of Luna Classic (LUNC) since its (re)birth:
Since August it has grown by more than 400% and seems to be rising from the ashes, reaffirming that it still has some rope. In fact, LUNC is already in the top 30 largest cryptocurrencieswith a Market Cap of USD 3,600M.
The most important reason for the rise in recent weeks is due to an update of this token, which has recently incorporated a LUNC burning mechanism. How does it work? Tax rate of 1.2% was introduced for each network transaction, seeking to make LUNC a deflationary asset.
This “tax” is applied to all transactions between wallets and smart contracts, and is automatically sent to an address without access, in such a way that the tokens are burned, reducing the supply of LUNC.
Additionally, token staking has become operational as part of the network update version 22. This generated greater incentives for its use, thus increasing demand and price.
Let us remember that staking is as if it were a “crypto fixed term”, in which cryptocurrencies are kept blocked, in order to receive a profit. The total amount of LUNC that is staked is around 8% of the total supply, which builds more confidence.
But LUNC was not the only token that flew. Also the new token LUNA had an explosion of more than 200% on Friday. This LUNA token is not related to LUNC, but is a new token created by the Terra founders that runs on a different blockchain than the original Terra one.
What can happen
It is very important to understand that it is unpredictable what may happen to Moon Classic. It has been a cryptocurrency that lost 99% of its value and is resurfacing from the bottom of the sea, with strong news and very violent movements.
As a general recommendation, no one should invest more money in Luna Classic than they are willing to lose. Surely there are risky investors who have already “bet” on the continuation of this spectacular rise. Can you keep going up? Yes, of course, but the risks are enormous.
Investing in Luna Classic is today a 100% speculative game. Any investment is speculative, of course, but Luna Classic is the extreme, as it has extremely high volatility.
In addition, it must be taken into account that today it already has a high market capitalization, something that is undoubtedly a limitation.
In short, for it to be successful in the long term, it will largely depend on the use and development of the network. Otherwise, you will be doomed to failure.
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CEO of Carta Financiero
Source: Ambito
