Terra Classic (LUNC) 30% Surge Behind the Scenes: On-Chain Data, Capital Flows, and Long-Short Battle Analysis

In late February 2026, the long-dormant Terra Classic (LUNC) suddenly became the market’s focus. Within just three days, LUNC’s price surged nearly 30%, sparking community speculation about a potential restart of the bull market. However, as of February 28, 2026, according to Gate data, LUNC’s price was $0.00004322, with an 8.49% decline over the past 24 hours, indicating a sharp pullback after the spike.

This volatility is not an isolated event. It occurred at a sensitive point when Bitcoin’s market dominance was decreasing, and funds appeared to be rotating into altcoins. It also coincided with new legal developments involving Jane Street and ongoing community narratives about token burns that have persisted for years. Is this rally a sign of structural recovery, or just another dead cat bounce driven by speculative sentiment? This article will analyze the core of this price movement through data reconstruction, sentiment analysis, and scenario simulation.

Event Overview: Rapid Rise Followed by Technical Pullback

According to Gate spot trading data, LUNC’s trading volume suddenly surged mid-week, with the price quickly rising from consolidation levels to a high of $0.00004794, hitting a recent peak. However, the upward momentum was short-lived, and the price quickly retreated, currently oscillating around $0.000043. Despite a 16.43% increase over the past 7 days, the 8.49% drop in the last 24 hours indicates clear profit-taking and divergence in the market at higher levels.

Revisiting Old Cases and Deflation Narratives

To understand this rally, we need to trace back to mid-February 2026. The key catalyst was the bankruptcy trustee of Terraform Labs filing a lawsuit against global quant giant Jane Street. The lawsuit alleges that Jane Street engaged in trading based on non-public information during the 2022 TerraUSD de-pegging event, exacerbating the market crash. This resurfacing of an old case sparked widespread discussion about historical accountability and potential compensation, prompting some speculative capital to flow into LUNC for a rebound.

Meanwhile, the community’s long-term deflation efforts continue. Data shows over 224 million LUNC tokens were burned in the past week. Although this is negligible compared to the circulating supply of over 5.46 trillion tokens, the ongoing burn narrative is amplified as a technical support factor, reinforcing the price.

The Underlying Tension Behind Price and Volume

Using on-chain and derivatives data from Gate, we can better understand the microstructure of this rally:

• Surge in trading volume and open interest: Price increases were accompanied by significant volume growth, with derivatives open interest rising from about $100 million to $160 million, a 60% increase. This indicates that the rally was driven not just by spot trading but also by leveraged speculative funds.
• Divergence in key indicators: Despite rising prices, the Chaikin Money Flow (CMF) showed a clear bearish divergence. Weakening CMF suggests that actual capital inflow behind the price increase was insufficient, indicating a fragile buying base.
• Negative funding rates: A warning sign is that during the rally, LUNC’s funding rates turned negative. This typically means that short positions are actively increasing, betting on a decline, even as prices rise. Such extreme long-short dynamics often foreshadow high volatility.

LUNC CMF, Source: TradingView

Legal Justice and Speculative Gambling Intertwined

Market sentiment currently splits into two camps:

One side emphasizes the legal narrative. They see the lawsuit against Jane Street as a step toward historical justice. If the court rules that market makers manipulated the market, potentially triggering compensation or buybacks, it could significantly boost LUNC’s long-term value.

The other side focuses on technical signals. They note the decoupling of price from Bitcoin (correlation dropping to 0.04), presenting independent trading opportunities. However, they remain cautious about the CMF divergence and negative funding rates, which could signal a top. For them, this is purely a speculative rotation, and if trading volume diminishes, prices could quickly revert.

LUNC and Bitcoin correlation, Source: TradingView

LUNC funding rate, Source: Coinglass

Is This a Driving Force or Just an Excuse?

We need to objectively assess the validity of these narratives:

• Litigation progress: Legal proceedings are lengthy, and Jane Street, as a top market maker, has a strong legal team. The outcome is highly uncertain. Using this as a short-term trading rationale carries significant risk.
• Burn and deflation: Although total burn volume continues to rise, its impact is minimal compared to the massive circulating supply. According to Gate data, with a supply of over 5.46 trillion tokens, the burn rate is far from enough to alter supply-demand dynamics meaningfully.

Speculation suggests that litigation and token burns are more likely excuses for this rally rather than fundamental drivers. The real core driver appears to be the sideways movement of Bitcoin, prompting some high-risk funds to seek opportunities in low-market-cap tokens.

A Typical Meme Asset Case Study

LUNC’s recent movement provides a classic example of community-driven assets. It demonstrates that even projects with no real development value can see their prices short-term inflated by narratives and sentiment, as long as community consensus and meme attributes persist. This serves as a warning to other dormant “zombie” coins and emphasizes that behind any hype, investors should objectively analyze on-chain data and market structure.

Scenario Analysis and Future Outlook

Based on current data, we project possible future developments for LUNC:

• Bearish continuation:
  • Logic: Negative funding rates and CMF divergence suggest dominance of short positions. Without new catalysts, prices may not sustain high levels.
  • Key levels: If the price breaks below $0.000041, it could further decline toward $0.000038 or even $0.000034.
• Stalemate:
  • Logic: The lawsuit remains uncertain, and market participants are waiting for new information (e.g., case updates or broader market trends) to break the deadlock.
  • Key levels: Price may range between $0.000041 and $0.000045, consolidating in a sideways pattern.
• Bullish reversal:
  • Logic: Confirmed positive shift in CMF and a move to positive funding rates would indicate sustained capital inflow. If legal developments surprise positively, a short squeeze could occur.
  • Key levels: Need to see volume break above $0.000047 and hold as a support level for a potential rally to higher resistance zones.

Conclusion

LUNC’s 30% rollercoaster reflects a typical mix of old narratives, speculative leverage, and technical divergence. It vividly illustrates how, in the current liquidity environment, low-market-cap assets can be rapidly inflated by narratives and leverage, only to be quickly pressured by data discrepancies.

For investors, detaching from emotional narratives and focusing on objective indicators like funding rates and CMF may be the best approach to navigate such volatility. Ultimately, market pricing is a combination of stories and data, with real buy/sell flows and leverage dynamics holding the decisive power.