Here’re why Terra Classic burns do not matter for token growth

The Terra ecosystem breakdown was undoubtedly one factor that caused the bitcoin market to implode. The algorithmic stablecoin created by Terraform Labs lost its peg with the U.S. dollar in May 2022, causing the old LUNA and UST tokens—now known as LUNC and USTC—to experience a steep decline.

Can Token Burns Make Terra Classic Skyrocket?

Terra left behind more than just a few losers in the cryptocurrency market. The massive crash delivered trillions of units of cryptocurrency to the market in addition to producing a new token and transforming the old one into Terra Classic.

More and more LUNC tokens were produced to keep the USTC peg, which caused the price of the altcoin to drop from $68 on May 7 to just $0.0001 on May 13. Additionally, Terra Classic’s supply was at an all-time low of 346 million tokens on April 7, 2022. The total number of circulating tokens for the alternative currency rose to 6.9 trillion after the May catastrophe.

LUNC has joined the family of devalued tokens due to a falling price and an excessive supply. People continue to have faith in an altcoin’s recovery, nevertheless, because of their drive for money and the investors who keep placing bets on inexpensive tokens in the hopes of becoming wealthy. Is it possible that LUNC would soar once more and turn investors become millionaires in a market that emphasizes assets like Shiba Inu? Some people believe that burning tokens is a positive response to this question.

Burning a token involves permanently removing it from circulation and reducing its supply. Burning tokens primarily aims to create scarcity, which can lead to asset appreciation. The burn may exert additional pressure on the price of a token to rise if demand for that asset rises.

The most competitive market, however, demonstrates that this is not a differentiator for a higher capitalization on its own. For instance, Binance’s token, BNB, in its early years, was able to increase the price of a cryptocurrency quickly after the exchange announced a burn. However, as time passed and there was more demand for the altcoin, these burns started to have less of an impact on the price of BNB.

Shiba Inu, a well-known cryptocurrency meme, follows the same path. Burns occur, but the token price is still somewhat low compared to its all-time high. Early in October, Binance burnt LUNC tokens valued at $1.8 billion, but that wasn’t enough to boost the cryptocurrency’s price. The coin has no meaningful use case aside from being the cryptocurrency that destroyed market confidence by losing 99% of its capitalization. At least 99% of the cryptocurrency’s market value must be burned for LUNC burning to impact its price.

Shiba Inu, a popular cryptocurrency meme, follows a similar path. Burns occur, but the token price is still far from its peak. Binance burnt LUNC tokens worth $1.8 billion at the beginning of October, but that wasn’t enough to boost the cryptocurrency’s price. In addition to being the cryptocurrency that damaged market confidence by losing 99% of its capitalization, the token has no practical application. Burns of LUNC must consume at least 99% of the cryptocurrency’s market capitalization to impact its price.

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