terra Classic

Is burning tokens the answer to Terra Classic’s struggle?

  • Terraform Labs and FTX were among the major causes of the crypto crash.
  • Tokens’ value depends on their availability and utility.
  • Studies say that 99% of its total supply needs to be burned.

One of the biggest contributors to the cryptocurrency’s ongoing crash other than FTX was Terra Ecosystem. Former LUNA, aka LUNC and UST, aka USTC, experienced a sharp fall in May 2022 when Terraform labs’ algorithm lost its peg with the USD. 

They then went on creating new tokens and turning old ones into Terra Classic, which resulted in the big crash, bringing trillions of altcoins into the system, making it lose its credibility and eventually losing its peg. 

To maintain the USD peg, they created more and more coins were created, but an algorithmic flaw in the system caused the altcoin to go from $68 on May 7 to $0.0001 on May 13. On April 7, 2022, Terra Classic had a supply of 346 million tokens in circulation, its all-time low supply. However, during the May crash, the circulation exploded to 6.9 trillion.

A falling price and extremely high supply caused LUNC to enter the list of discredited Token family. Although the desire for wealth, and the investors who keep on betting on the cheap token, give us hope that the token may recover. To answer when and how it is not possible.

A token’s price is ruled by two main factors, its supply and its utility. Utility increases demand, and low supply increases its price. So if this concept is to be believed, the path ahead for LUNC is to burn the tokens and find ways to increase their utility. But will it help?

Suppose they somehow managed to increase its demand, then only burning could be a major factor. 

For Example, BNB, the token of biggest crypto exchange, during its early days, managed to make its price grow when the exchange announced its burning, but as time went by and demanded increased, resulting in a surge in price, the burning of the token was not the deciding factor here. 

SHIB has a similar trajectory; ongoing burns are proving to be ineffective in raising the coin price, which is now at $0.000008984, showing the least signs of improvement. 

In early October, the leader of crypto industry burned $1.8 billion worth of LUNC, but this proved to be insufficient for the expected growth. Aside from being burned, the market confidence in the token has fallen down by 99%, basically making it a token with no real use case.

Some studies say that for LUNC to regain its position and go further ahead, 99% of its total 5,982 billion had to be burned, and minimal transactions on the token make it impossible to burn them through altcoin transfer. The whole burning process may or may not be carried out.

However, the unpredictability of the market can not be ignored; the arrival of cheap tokens could contribute to Terra Classics’ position away from the spotlight. Burning the token still remains unimportant. 



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