Key Insights:
- Stochastic value at zero indicates extreme short-term oversold conditions.
- DeFi TVL and inflows remain critically low across Terra Classic.
- Token burns have been steady but have limited effect on supply.
New technical dots show that Terra Classic is currently in a technically oversold state. The stochastic oscillator shows a current value of 0.
This reading in traditional technical analysis suggests that the asset is currently at or close to the bottom of its recent two-week price range.
Since this condition is considered a precursor of a trend reversal or a potential price rebound, it might imply that an exhaustion of the downward selling momentum is underway.
If a reading is near 0, then the range represents the low point of Terra Classic’s previous price.
This does not by itself imply a sure recovery, though it indicates a cooldown of bearish pressure.
Though the market appears oversold, a sustained rally would require a correspondingly higher engagement of the market and inflows.
However, the evidence for this is not strong yet. In a market such as Terra Classic’s with its current lows of liquidity and participation, any technical bounce could easily hit strong resistance unless it is supported by solid demand.
DeFi TVL Remained Subdued Despite Slight Uptick in Daily Inflows
Further, decentralized finance metrics show Terra Classic is failing to regain market traction. According to DeFiLlama data, at the time of writing, the network’s TVL stood at $733,010.
This represents a 1.58% growth in the last 24 hours. A healthy improvement, though, is still well below historic levels of TVL.
That stark contrast is especially pronounced when considering Terra Classic’s state from 2021 to 2022.
This is when billions of dollars in assets were frozen on the protocols before the ecosystem crashed.
The market capitalization on Terra Classic’s stablecoin market stood at around $524,025 as of press time.
This low number reemphasizes the fact that the ecosystem is not receiving substantial capital or trust from users to stash their money for stability or yield.
Additionally, the daily fees of the chain are just $143, which is low compared to the network usage, transactions, and DeFi activity.
However, the economic activity on Terra Classic’s chain is minimal as transactional volume continues to remain low.
Daily Inflows also signify a low interest environment of $719.43. Although there is a notable increase in TVL in the last 24 hours, there is still not enough of it to indicate real growth or commitment.
These inflows could be driven by niche use cases or legacy chain users who are still using the chain to interact with the chain because they have loyalty informed by experimental interest.
However, they do not indicate institutional play or a wider developer ecosystem renaissance.
Nevertheless, the TVL in Terra Classic has not even reached $1 Million. This is despite ongoing operations until some months ago.
Terra Classic currently shows a fool’s gold appearance based on macro skepticism and platform limits. However, despite these, the small daily growth ticks as seen from market data could mean there is still life.
Token Burn Tracker Shows Steady Activity But Limited Impact on Supply
Additionally, one of the critical aspect on Terra Classic’s network is token burning.
This is in order to reduce its circulating supply and reintroduce the perception of scarcity around LUNC.
Data shows that since May 13th, 2022, 407.98 billion LUNC tokens have been burned.
From the last seven days alone, it brought the supply of tokens down from 158 million.
These figures imply that the burn schedule was consistent, performed by automated means or community-based protocol.
However, the circulating supply of 6.49 trillion LUNC is very high. Specifically, while about 7% of all the available supply was removed from the market with the first group of DAOs, this amount of burning was done more than a year and a half into the project.
With weekly burns under 200M LUNC, this is a minuscule fraction of 0.0024% to 0.0025% of the total supply.
Theoretically, token burns are deflationary and (in the right amounts) increase price positively by decreasing the supply.
In reality, the ramification is not quite as forceful, except when burn volumes are so gargantuan or they come in equal combination with burst volumes of similar magnitude.
More specifically, in Terra Classic’s case, there is a historically long run narrative to create a supply-disciplined market through burns which don’t materially displace market dynamics in real time.