Terra Classic’s 1.2% tax burn supports bullish outlook but here’s an issue

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Terra Classic [LUNC] had a pretty exciting time in the past few days as it approached a major milestone implementation. Since the May crash, the community has expressed concern about the excess LUNC supply in the market. The 1.2% tax is intended to solve this problem.

Unfortunately, many LUNC traders and potential traders may not understand what the 1.2% tax is all about, so here’s a quick explanation. All on-chain LUNC transactions are subject to a 1.2% tax. This includes wallet and smart contracts interactions. However, LUNC transactions on exchanges may not qualify for the tax.

The idea behind the tax is that it will help reduce LUNC’s oversupply. One of the main drawbacks is that it will make Terra Classic on-chain transactions more expensive.

A price that the community is willing to accept this trade-off in favor of a deflationary outcome. It’s still unclear whether potential projects looking to roll out their protocols on Terra Classic will find this challenging.

The LUNC rocket

LUNC delivered a robust bullish performance this week, likely due to the positive response to the 1.2% tax. Such measures will aggressively reduce oversupply and this will have a positive effect on long-term price action.

The coin has gained about 160% in the past seven days. This advantage was enough to place it deep in overbought territory and hence the current near-term bearish outlook.

Source: TradingView

The cryptocurrency had already fallen 16.77% at press time, confirming that profits have already been taken after the overbought conditions.

However, its downside may be limited as the tax and incineration mechanisms already encourage a lot of capital injection at lower price levels.

Additionally, LUNC is currently experiencing an influx of social volume. This has been the case for the past two days, indicating that more traders are paying attention to what is going on.

Such a result may encourage more LUNC accumulation and mitigate its downside, as there is now a strong incentive for long-term HODLing.

Source: Santiment

Terra Classic’s weighted sentiment stat is trying to improve significantly in favor of the bulls. These developments could send LUNC into a strong accumulation phase as investors start to focus more on the network.


The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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