However, technical charts on LUNA point to a possible 50% drop in price in the coming weeks.
Terra (LUNA) surged to its highest level yet on March 29, as the Luna Foundation Guard’s (LFG) plans to increase its Bitcoin (BTC) holdings eased anxiety over the impact of an increasingly tougher Federal Reserve, and the current war between Ukraine and Russia in the cryptocurrency markets.
LUNA price broke the previous all-time high of $106.29 by a small margin, reversing the losses incurred during the crash between December 2021 and January 2022.
The recent price rally saw the Terra token net capitalization exceed $37.17 billion, now accounting for 1.76% of the entire cryptocurrency market, up from 0.39% earlier this year.
Terra follows Steps of MicroStrategy
Bitcoin wallets associated with the LFG, a non-profit organization headed by Terra creator Do Kwon, saw an inflow of 2,830 BTC worth $135 million on Monday. The influx came as part of the foundation’s Bitcoin buildup following a community proposal that suggested using BTC as collateral to “provide large discounted liquidity when the UST peg comes under pressure.”
UST is Terra’s decentralized stablecoin that is collateralized by the native cryptocurrency of the LUNA Blockchain. As such, the Terra economy supports burning LUNA tokens to mint more UST units as a strategy to maintain the latter’s peg to the dollar.
LUNA to Face Risks of an Immediate Collapse
From a technical point of view, LUNA faces the possibility of a 50% price correction in the coming weeks, although this need not hurt the long-term bullish outlook.
In detail, the Terra token has been consolidating within what appears to be an ascending channel, a continuation pattern that appears after the price fluctuates within a range defined by an upper and lower ascending horizontal trend line.
In a perfect scenario, the setup resolves with a breakout in the direction of the asset’s previous trend, rising as much as the maximum distance between the channel’s upper and lower trend lines. As a result, the price of LUNA could rise to USD 425 in 2022.
The bullish outlook, nevertheless, needs further confirmation, starting with a decisive break above the upper trend line of the triangle. If not, LUNA’s prospects for a sharp pullback towards lower trend lines look higher, meaning a price drop towards the $50-60 range, 50% lower than the current price.
Until now, LUNA was the seventh-largest cryptocurrency by market capitalization; it is currently trading at $88.41. Recently, the price of LUNA fell by 10% while it increased by 13% in the previous seven days. LUNA volatility has decreased by 55.5% in the last 24 hours, although it has increased by 29.7% in the last week. This makes LUNA desirable to investors. New investors looking to join the recovery could use this as an incentive to do so.
As measured by Santiment.net, weighted sentiment was negative on March 11, fluctuating at -0.3. After falling from a high of 3.92, this was the next level. LUNA prices fell after the initial increase, which could be a factor. Additionally, investors may feel that corrections may be on the horizon after such a rapid rise.
By Audy Castaneda
