Terra Luna Up 100% During The Weekend; Why?

• Aakanksha Chaturvedi
• 23 May, 2022

The cryptocurrency by Terraform Labs had wiped out erasing billions of dollars of investors in the month of May.

Terra Luna, the volatile cryptocurrency by Terraform Labs witnessed a 100 percent pump over the weekend.

Interestingly, Terra Luna had wiped out 100 percent earlier this month after the stablecoin TerraUSD de-pegging fiasco, wiping off billions of dollars of investors' wealth and bringing stablecoins under regulatory scrutiny.

The token surged 100 percent over the weekend and is still up 60 percent on Monday, as per data from CoinMarketCap at 9:00 am IST.

So, what might have caused this rapid pump in the value of the token? Some possible reasons are listed below:

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Burning of the token

As a part of the plan to revive the Terra ecosystem, Do Kwon had proposed to burn the Terra Luna token and cap the supply at 1 billion. Burning crypto currency is the process of removing crypto tokens from circulation.

This reduces the total number of tokens of the cryptocurrency in circulation.

The tokens are delivered to a wallet address that may only be used to receive the crypto and for no other purpose.

The wallet is disconnected from the network, rendering the tokens useless.

Terra Luna shorting becomes difficult

The increase in the value of Terra Luna can be attributable to the difficulty traders are facing in shorting the asset.

The majority of crypto exchanges have suspended margin trading of the Terra Luna token which has led to the inability of shorting the token.

Shorting in trading is the process of borrowing an asset and selling it at a high price and then buying it at a low price and returning it. The difference is the profit the trader earns. 

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A hard fork of Terra network

Do Kwon, the founder of Terraform Labs, had proposed that the Terra network be hard forked, and the Terra Luna token be transferred to the new chain.

This proposal was received positively by the community with over 80 percent of users in favor of the ‘Hard fork.’

This could be one of the reasons why the token pumped over the weekend. - BusinessToday.In