Tech

Binance burns $1.8 million worth of Luna Classic

10/04/2022
Bitcoin Ethereum News

Yesterday Binance announced its first burn of LUNC (Luna Classic). 

Luna Classic: Binance burns tokens

The exchange has destroyed all LUNC tokens collected from trading fees.

Luna Classic is the new name that was given to the Luna cryptocurrency after the implosion of the Terra ecosystem (renamed Terra Classic), and the birth of the new LUNA cryptocurrency. 

Before the collapse, the value of LUNC, when they were still called Luna, was about $86, but within a week just before the middle of May their value had almost gone to zero, even falling below $0.01. 

This real rapid implosion was also due to an incredible explosion in the number of tokens in circulation. 

In fact, Luna’s supply was not fixed, and varied algorithmically to try to keep the value of the UST stablecoin fixed. When the implosion of UST began, the system went haywire, and a huge amount of Luna tokens were produced. It went from about 345 million moons to over six trillion in the space of a week. 

This boom literally destroyed the market value of the tokens, effectively imploding the entire Terra ecosystem. 

However, starting in late May, the old Terra team abandoned the old ecosystem and created a new one with the same name. The old ecosystem was renamed Terra Classic, the old cryptocurrency was renamed Luna Classic (LUNC), and a new team took over its management. 

One of the initiatives taken was precisely to attempt to reduce the immense supply by starting to burn tokens. 

Currently, of the more than 6.9 trillion LUNC in existence, there are “only” a little more than 6.890 billion in circulation, thanks precisely to the burn process. 

This includes the more than 5 billion LUNC just burned by Binance. 

Although 5 billion may sound like a large number in words, it is instead only less than 0.08% of the LUNC tokens in circulation, so in itself the impact of this burn on cryptocurrency supply is insignificant. 

In addition, so far overall 0.14% of total LUNC tokens have been burned, so an insignificant percentage. It is worth bearing in mind, however, that not all of the LUNC in circulation are in the market. In fact, many of these are locked, so the real impact of burns on tokens outstanding in the market is greater. 

This generated a 20% increase in the value of LUNC in the market yesterday, although then much of this gain vanished today. 

Luna Classic the token for speculation

LUNC currently remains a cryptocurrency on which speculative trading prevails, amplifying the impact of news both upward and downward. This explains both why such an infrequent percentage burn could have generated a market value increase of as much as 20%, and why that gain was almost completely lost in the hours following the peak. 

It is worth noting that the lowest peak in recent months was reached last week, that is, on 26 September, and since then the price of LUNC has risen 73%. This figure clearly shows how speculative this cryptocurrency still is right now. 

Moreover, it is worth noting that compared to the all-time low in mid-May, the growth at present appears to have already been 31,800%, despite the fact that this has not allowed it to approach pre-crash levels in the slightest. In fact, compared to Luna’s value at the beginning of May, the current loss continues to be more than 99.99%. 

It is worth mentioning that Binance has been involved in the Terra project since practically its inception, so despite all that has happened, it continues to do its part, for example by burning the LUNC collected from trading fees. 

Even though at present it seems unlikely that the supply of LUNC will shrink dramatically with these burns, the fact that these are continuing and that much of the supply is in fact locked up suggests that perhaps in the future its market value may rise somewhat. 

Certainly, it is almost impossible that it could ever recover to pre-burn levels, and it also seems extremely unlikely that it could ever return to $1. Indeed, at present it seems decidedly unlikely that it will even be able to get back above the penny. 

Much will depend on the management of the new team, and especially on whether they manage to restore momentum to a project that in fact failed in May. It is worth noting that it may suffer from competition from the new Terra project, and thus also from the new LUNA cryptocurrency, although the new ecosystem lacks the algorithmic stablecoin that was the basis of the previous one. 

Meanwhile, Binance is expanding, with the opening of two new offices in Brazil. 

Latin America seems to be fertile ground for cryptocurrencies, as the case of El Salvador shows, and Brazil is the largest country in the entire area, as well as a country where interest in cryptocurrencies is particularly widespread. 

By now, more and more countries require exchanges to open physical locations in order to operate within them, so it is more than logical that exchanges open offices especially in those countries where they have more customers. 

In Brazil, Binance has chosen to open offices in the two main cities, São Paulo and Rio de Janeiro, where it has more than 150 employees. The company points out that most of these employees will work on customer service and support, and that Brazil is among the top 10 markets in the world for the exchange. 

The company recently purchased local broker Sim;paul in order to also acquire a license as a regulated payment institution, although this transaction is still under consideration by the central bank. Should it be approved, Binance would be able to operate in Brazil under a special government license. 

In order to ensure its development in accordance with the law in the country, Binance recently also announced the hiring of former Brazilian central bank president and former finance minister Henrique Meirelles to the company’s advisory board.

Source: https://en.cryptonomist.ch/2022/10/04/binance-burns-1-8-million-worth-luna-classic/