USTC Price Jumps as Terra Luna Community Approves 800M Token Burn

Key takeaways

• Terra Classic community votes to burn 8% of the total USTC supply
• This marks a continued effort from the Terra Classic community to revive the project in the absence of now-arrested founder and former CEO, Do Kwon
• The price of USTC rose 11.8% after the community vote took place

A community-led governance initiative has voted to burn a total of 800m USTC tokens in a bid to revive Terra Luna (LUNC). LUNC (formerly LUNA) lost 99.99% of its value in May 2022, at a time where its value had just reached its all-time high of $116.

The recent decision to burn a significant portion of USTC’s circulating supply marks a continued effort from the community to recover the loss of value seen during the Terra crisis of 2022.

In total, more than 8% of USTC’s circulating supply will be burned. The announcement caused bullish price action, leading to an 11.8% price rise for USTC on 20th August 2023.

What happened to Terra in May 2022?

Terra Classic (LUNC) suffered a major supply shock that caused 99.99% of its value to be lost over a 72 hour period in May 2022. This was due to the Terra ecosystem’s algorithmic stablecoin protocol, which leveraged a variable supply mechanism for the LUNA governance token to peg the value of UST to the US Dollar.

As LUNA investors sought to swap their tokens for UST en masse, the UST stablecoin lost its peg. This led to hyperinflation for LUNA as the algorithm sought to correct the depegging event. In total, the number of LUNA tokens in circulation rose from 380 million to 6.5 trillion.

You can find more information about what happened to LUNA here.

How could a USTC token burn help to revive Terra Classic?

Since the collapse of the Terra ecosystem in 2022, the community has banded together in an attempt to revive the project. LUNA was rebranded to LUNC, and more than 68 billion tokens have been removed from circulation as of July 2023 thanks to the Luna Classic burn initiative.

Token burns work on the assumption that demand for an asset remains static or improves. If supply is reduced and demand remains the same, then the value for each individual token will rise based on its scarcity.

LUNC’s burn initiative has reduced the circulating supply to 5.8 trillion tokens; however, the token continues to lose value based on declining levels of demand. In May 2022, even after the collapse, there were more than $100 million worth of LUNC tokens being traded on a daily basis. Now, the daily trading volume is regularly below $20 million.

With the price of LUNC continuing to fall despite the ongoing burn initiative, the Terra community has now turned its attention to USTC. USTC formerly had a market capitalization of $18.7 billion, but the stablecoin’s depegging event and the resulting bank run on the Terra ecosystem has led to a sharp decline in value.

The Terra community’s recent announcement, that more than 8% of the total USTC supply will be burned, has marked a shift. So far, USTC has seen an increase in trading volume as speculators seek to position themselves ahead of a possible rise in value.

On 20th August 2023, USTC’s daily trading volume rose by 50%, leading to an 11.8% spike in the price of USTC. It remains to be seen whether the USTC token burn can help to revive the market cap, but continued efforts from the Terra community have certainly kept the project breathing.

LUNC price prediction

The current price of LUNC is $0.00006543, down 2% in the past 24 hours. The CoinCodex price prediction algorithm expects the price of LUNC to remain static over the coming 30-day period. The price prediction for LUNC by 20th September 2023 is $0.00006549.