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April 11, 2022

Terra (LUNA) Forecast 04/11

On April 11, the price of Terra (LUNA) fell as a broader slump in crypto assets added to the uncertainty around its token burning mechanism.

The collapse of Bitcoin (BTC) and Ether (ETH) led to a slump in the remainder of the cryptocurrency market, with LUNA’s price falling over 8% to approximately $91.50, and nearly 30% from its record high of $120 reached on April 6.

After the Federal Reserve declared its intentions to hike interest rates and cut balance sheets dramatically to combat growing inflation, the overall drop followed similar swings in the US stock market last week.

Bitcoin’s association with tech equities, according to Arthur Hayes, co-founder of BitMEX exchange, might see it hit $30,000 next.

To put it another way, LUNA’s high correlation with BTC so far this year puts it at danger of further decline if BTC does not recover. At least two “exposé” threads that went popular on Twitter over the weekend provided more adverse cues to LUNA.

The first discussion, started on April 7 by a pseudonymous analyst named @DeFi Made Here, questioned LUNA’s capacity to maintain the peg of TerraUSD (UST), Terra’s native stablecoin, because it is not backed by any actual asset.

The second thread, written by Jack Niewold, an analyst at the Crypto Pragmatist – a DeFi publication — accused Terra co-founder Do Kwon of getting all of the LUNA tokens intended to be “burned” to create UST on April 9.

He further claimed that the Luna Foundation Guard, a non-profit group that supports the Terra ecosystem, has been buying Bitcoin using a portion of the burned LUNA supply.

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In a tweet-to-tweet reaction to Niewold, Kwon rejected the charges, calling him a made-up clickbait. Terra burns LUNA 1:1 to create new UST, according to the self-proclaimed “master of stablecoin,” as evidenced by a swap on the Anchor Protocol dashboard.

Jose Maria Macedo, the CEO of crypto research platform Delphi Digital, slammed Niewold’s discussion as “awful.” In addition, the most recent LUNA selloff pushed the currency’s price below its major moving average support against the US dollar.

In more detail, the Terra token has fallen below its 50-day exponential moving average (50-day EMA; red wave in chart below), which is now under $90, almost two months after reclaiming it as support.

The most recent support-to-resistance flip puts LUNA in danger of extending its downtrend toward its 200-day EMA (the blue wave) in April, which is about $67 (around 20% lower than April 11’s price).

The 0.382 Fib line of the Fibonacci retracement graph, drawn from the $4 swing low to the $106 swing high, also coincides with the 200-day EMA, providing LUNA with double-layered support against bears.

An early rebound from the 0.236 Fib line (around $82), on the other hand, may see LUNA retest $106 as an interim upside goal.