Following an announcement by Binance, the largest cryptocurrency exchange in the world by volume, that it would enable a burn mechanism for the network, Terra Classic (LUNC), the original cryptocurrency token of the Terra-LUNA blockchain that crashed back in May, increased by over 50% on Tuesday. Although, according to Santiment, Terra Classic (LUNC) will have extremely high volatility for an entire week.
The implementation of a burn mechanism on LUNC spot and margin trading fees was previously disclosed by Binance. In an effort to lower the token’s circulating quantity, the largest exchange in the world by 24-hour trading volume will transfer all spot and margin trading fees for LUNC to the official LUNC burn address.
Following the release, LUNC’s price soared more than 30% in a single day as a result of the good news. LUNC has dropped to a low of $0.00018 in the last day. The Binance statement, however, helped the token’s price surge to a high of $0.00031.
Why the Burn Mechanism?
The Terra Classic community has been working to rebuild LUNC and USTC after the tokens experienced a catastrophic collapse that caused a $60 billion wipeout. In order to lower the amount of LUNC in circulation, the community set up a burn address where members might voluntarily transfer some of the tokens.
Despite burning billions of LUNC tokens, the community increased the LUNC burn rate by imposing a 1.2% tax burn on all on-chain transactions involving the cryptocurrency. The burn plan has already been adopted by a number of exchanges, which has raised the token’s price.
The price of LUNC increased by almost 180% earlier this month after the community’s burn plan was disclosed, reaching $0.0005888, the token’s highest price since May’s collapse. However, the price of the token then started to decline, until seeing huge price increases on Tuesday.