LUNC recovers at the beginning of the new year as the burning mechanism continues to prove effective

Terra Classic (LUNC) slightly decreased by 1% at the time of reporting on Thursday, temporarily stabilizing after a strong 13% surge recorded on Wednesday. LUNC burning activity continues steadily, with over 124 million tokens burned just on Wednesday, thereby fueling short-term price rallies of this coin. However, technical signals indicate that the current downtrend still dominates, as previous recoveries have quickly weakened and did not last.

Daily token burn drives LUNC price

Data from LUNCmetrics shows a sharp increase in the LUNC token burn rate, becoming a key catalyst for the recovery of Terra Classic’s price. Specifically, on Wednesday, more than 124 million LUNC were burned, the highest since December 17, raising the total tokens removed from circulation to over 430 billion. In theory, reduced supply usually supports an upward trend; however, LUNC still faces a severe oversupply, with approximately 6.47 trillion tokens still in circulation, creating prolonged selling pressure on the market.

Total LUNA Classic burned | Source: LUNCmetricsNotably, the current recovery likely reflects the market’s “pricing in” of legal risks related to Terra, including Do Kwon’s final hearing in a case that could result in a 15-year prison sentence, as well as a $4 billion lawsuit against Jump Trading, alleging illicit profits from Terra Labs’ $40 billion collapse.

Technical outlook: Can LUNC sustain its recovery?

Terra Classic (LUNC)'s strong 13% rally on Wednesday officially ended a three-day losing streak, while also pushing the price above the 50-day exponential moving average (EMA) at $0.00004055. However, on Thursday, LUNC adjusted slightly downward by about 1% and is still struggling to break through the important resistance at the 100-day EMA at $0.00004309.

In a positive scenario, if LUNC can surpass this moving average, the price is likely to continue upward toward the 200-day EMA at $0.00004963, coinciding with the R1 Pivot point around $0.00004945 – a notable resistance zone.

Daily LUNC/USDT chart | Source: TradingViewTechnical indicators on the daily timeframe still show a neutral stance but are gradually indicating a bullish bias. The Relative Strength Index (RSI) is oscillating around 51, close to the neutral line, reflecting a tug-of-war between buyers and sellers.

Notably, the MACD line is approaching the MACD signal line as bearish momentum weakens significantly. A bullish crossover may soon form, triggering buy signals and opening opportunities for LUNC to recover its upward momentum.

Conversely, if the price fails to hold the support level at $0.00004055 and drops further, LUNC risks returning to test the December 19 low at around $0.00003610.

SN_Nour