Terra (LUNA) Feels the Force of a Bitcoin Slide to sub-$35,000
Key Insights:
– Terra (LUNA) tumbled by 12.0% on Saturday, following a Friday 6.1% slide.
– This week, the Luna Foundation Guard (LFG) purchased an additional $1.5bn in bitcoin, which has stumbled to sub-$35,000.
– Technical indicators are bearish for LUNA, with LUNA sitting below the 50-day.
On Saturday, Terra ( LUNA ) slumped by 12.0%.Following a 6.1% slide from Friday and a 4.4% decline on Thursday, LUNA ended the day at $68.07.
Market sentiment towards inflation and Fed monetary policy hit riskier assets on Thursday and Friday.Bearish sentiment spilled over the crypto market, with bitcoin ( BTC ) sliding to sub-$35,000.
Luna Foundation Guard Bitcoin Holdings Leaves LUNA on the Ropes
This week, the Luna Foundation Guard (LFG) purchased an additional $1.5 billion in BTC.
Do Kwon, co-founder, and CEO of Terra Labs, also announced the $1.5 billion BTC purchase on
[Twitter] , saying,
“LFG acquired 1.5B worth of bitcoin over the last few days.”
LFG acquired 1.5B worth of bitcoin over the last few days
A lot more to go
Now time to water the plants 🌱
— Do Kwon 🌕 (@stablekwon) [May 5, 2022]
Do Kwon went on to tweet,
“Worry not about #Bitcoin – it is a fungible freedom to counter fungible state violence in fiat.”
Adding,
“And its rise will be inevitable as long as humanity yearns to be free.”
Worry not about [#Bitcoin] – it is fungible freedom to counter fungible state violence in fiat.
And its rise will be inevitable as long as humanity yearns to be free
— Do Kwon 🌕 (@stablekwon) [May 5, 2022]
In February, the LFG created a BTC denominated reserve for TerraUSD ( UST ), which supported the LUNA rally to an all-time high of $118.03 on March 4.
Bitcoin’s reversal has adversely impacted LUNA in recent days, with LUNA underperforming the broader crypto market.At the time of writing, LUNA is ranked #9 on CoinMarketCap, with Cardano ( ADA ) now holding the #8 spot.
According to Defi Llama, Terra’s total value locked currently sits at $23.78bn, down 15.8% over 24-hours.Terra’s (LUNA) total market cap at $22.55 billion, however, is down 10.5%, suggesting more LUNA downside.
While bitcoin’s fall to sub-$35,000 and TVL divergence has impacted, there is also influence from the UST pegging mechanism to the US dollar.
At the time of writing, UST was up 0.19% to $0.9954.UST fell by 0.57% on Saturday, with UST sliding to a day low of $0.9831 before ending the day at $0.9935.
A UST fall below $1.00 forces the sale of LUNA, adding further downward price pressure on LUNA.
Unlike Tether ( USDT ), UST’s peg to the US dollar is maintained through algorithms rather than cash and debt reserves.
To support the UST peg at $1, traders sell LUNA for UST when the price of UST sits below $1.This reduces the supply of UST and increases the supply of LUNA.
The reduced supply of UST supports a move back towards $1.
LUNA Price Action
At the time of writing, LUNA was down 3.54% to $65.66.A bearish start to the day saw LUNA slide to an early morning low of $61.71.The First Major Support Level at $61.68 delivered early support.
Technical Indicators
LUNA will need to move through the day’s $69.58 pivot to target the First Major Resistance Level at $75.95.LUNA would need broader crypto market support for a return to $70.
An extended rally would test resistance at $80 and the Second Major Resistance Level at $83.85.The Third Major Resistance Level sits at $98.12.
Failure to move through the pivot would bring the First Major Support Level at $61.68 back into play.Barring an extended sell-off, LUNA should steer clear of the Second Major Support Level at $55.30.
Looking at the EMAs and the 4-hourly candlestick chart (above), it is a bearish signal.LUNA sits below the 50-day EMA, currently at $80.85.
This morning, the 50-day EMA pulled back from the 100-day EMA.
The 100-day EMA also fell back from the 200-day EMA; LUNA price negative.
A move through the 50-day EMA would shift near-term sentiment..