Terra LUNA – daily chart
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Investing.com – Cryptocurrencies have been falling since the end of last week, last night, and posting a 9% 24-hour drop at the time of writing.
But that’s nothing compared to , the 12th largest cryptocurrency on the market in terms of market capitalization, which has posted a vertiginous collapse of more than 45% since yesterday, and 60% over a week. This is the worst Crypto Top 500 drop at the time of writing.
The cryptocurrency thus marked a low on Tuesday morning at $26.91, the lowest since September 2021. Since the historic record of $119.39 on April 5, just over a month ago, Terra (Luna) has therefore posted a impressive dive of more than 77%.
TerraUSD Loss of Dollar Link Crashes Terra (LUNA)
In question, we find the loss of the link with the dollar of the stablecoin, the crypto sister of Terra (LUNA), which is the 10th most important cryptocurrency on the market. Currently, this stablecoin, which is supposed to replicate the value of the US dollar, is only worth 0.773 USD.
Remember that stablecoins owe their name to the fact that they are linked to the value of currencies issued by governments, such as the dollar. These $1 pars are usually backed by treasury bills, cash, and other dollar debt that are easily sold during times of market stress. But unlike traditional stablecoins, TerraUSD is an algorithmic stablecoin, which relies on financial engineering to maintain the link to the dollar.
Such designs have been criticized by market watchers, who consider them risky, as they rely on traders to bring the value down to $1, instead of having assets that continually support the price.
In the case of TerraUSD, if its price falls below one dollar, traders can “burn” the coin, i.e. remove it permanently from circulation, in exchange for one dollar of new units of Terra (LUNA), which increases the supply, and therefore mechanically impacts the price of LUNA downwards (and pushes UST up).
Thus, the loss of the link of TerraUSD with the Dollar explains the plunge of Terra (LUNA).
Additionally, Do Kwon, the South Korean developer behind TerraUSD, made headlines recently for using LUNA to buy bitcoin and other cryptocurrencies in an attempt to partially support UST. This was presented as a means of securing UST’s anchorage while maintaining decentralization, but mechanically constitutes a negative factor for LUNA.
Technical thresholds to monitor on Terra (LUNA)
From a technical point of view, it should be noted that the collapse of Terra (LUNA) in recent days has been the occasion of several major bearish signals, with in particular the breakouts under the 100 and 200 day moving averages, as well as under several important psychological thresholds.
As for the technical thresholds to watch on the Terra (LUNA) charts, the $30 threshold tested overnight from Monday to Tuesday is immediate support, ahead of the $22/24 area (March 2021 high and trough of September 2021). On the upside, a move back above $50 at a minimum is needed to ease downside pressure on the daily chart.