Terra Classic’s 1.2% tax burden supports bullish outlook, but here’s the problem

Terra Classic [LUNC] The last few days have been very exciting as we near the implementation of a major milestone. The 1.2% tax aims to solve this problem.

Unfortunately, many LUNC traders and potential traders may not understand what the 1.2% tax is, so here’s a quick explanation. All on-chain LUNC transactions are subject to a 1.2% tax. This includes exchanges between wallets and smart contracts. However, his LUNC transactions on exchanges may not be subject to tax.

The idea behind the tax is that it helps reduce the LUNC oversupply. One of the main drawbacks is that Terra Classic’s on-chain transactions are more expensive.

The price at which the community is willing to accept this trade-off in favor of the deflationary outcome. It remains to be seen whether this will be a challenge for potential projects looking to deploy the protocol on Terra Classic.

LUNC Rocket

LUNC has shown solid bullish performance this week. This is likely due to the positive reaction to the 1.2% tax. Such measures would actively reduce oversupply and have a positive impact on long-term price action.

The coin has gained about 160% over the past 7 days. This rally is enough to drive deep into overbought territory, hence the current short-term bearish outlook.

Source: Trading View

The cryptocurrency was already down 16.77% at the time of writing, confirming profit-taking has already taken place after the overbought situation.

However, the downside may be limited given that the tax and burn mechanism already drives a lot of capital injection at low price levels.

Additionally, LUNC is currently experiencing an influx of social volume. This has been the case over the last two days and shows that more and more traders are paying attention to what’s going on.

Such an outcome could promote LUNC accumulation and mitigate its downsides.

Source: Santimento

Terra Classic’s weighted sentiment metric is about to improve significantly in favor of the bulls. These developments could push LUNC into a strong accumulation phase now that investors have become accustomed to the network.

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