Classic Earth [LUNC] had a pretty exciting time in the last few days as it neared a major rollout. Since the May crash, the community has expressed concern about the oversupply of LUNCs on the market. The 1.2% tax is intended to solve this problem.
Unfortunately, many LUNC traders and potential traders may not understand what the 1.2% fee is, so here’s a brief explanation. All on-chain LUNC transactions will be subject to a 1.2% tax. This includes the interactions of the portfolio and smart contracts. However, LUNC trading on an exchange may not be eligible for tax.
The idea behind the tax is that it will help reduce LUNC oversupply. One major drawback is that it will make Terra Classic’s on-chain transactions more expensive.
A price that the community is willing to accept this trade-off in favor of a deflationary outcome. It is still unclear whether potential projects looking to implement their protocols on Terra Classic will find this to be a challenge.
You are ready for the 1.2% Tax Proposal
Burn Parameter Change? 🌕
RT IF YOU WANT THE OUTPUT TO HAPPEN pic.twitter.com/hcjdKjaxbs
—Luncvalidator (@luncvalidator) 1 September 2022
The LUNC rocket
LUNC provided a solid bullish performance this week and this is likely due to the positive response to the 1.2% tax. Such measures will aggressively reduce oversupply and this will have a positive impact on its long-term price action.
The coin has risen by around 160% over the past seven days. This upside was enough to bring it into overbought territory and hence the current short-term bearish outlook.
The cryptocurrency was already down 16.77% at press time, confirming that profit-taking was already taking place after the overbought conditions.
However, its downside may be limited considering that taxation and consumption mechanisms are already encouraging many capital infusions at lower price levels.
Additionally, LUNC is currently experiencing an influx of social volume. This has been the case for the past couple of days, indicating that more traders are paying attention to what’s going on.
Such a result can encourage greater accumulation of LUNCs and mitigate the downside because there is now a strong incentive for long-term HODLing.
Terra Classic’s weighted sentiment metric is attempting to improve significantly in favor of the bulls. These developments could plunge LUNC into a strong accumulation phase as investors are getting closer to the network.