LUNA Falls Back to sub-$90 Despite Terra Plans for a $10B BTC Reserve

Key Insights:

• Terra (LUNA) slides back from Monday’s high despite plans to lift the (BTC) reserve to $10 billion.
• In February, Luna Foundation Guard (LFG) raised $1bn in Bitcoin through a private LUNA token sale.
• Anticipated Terra stablecoin demand continues to support a LUNA return to $100.

On Thursday, it was a bearish session for LUNA. Reversing a 0.77% gain from Wednesday, LUNA fell by 2.68% to end the day at $86.87.

It was a second day in the red from 3-sessions, with LUNA giving up gains from Monday. On Monday, LUNA had rallied by 8.38% in response to Bitcoin (BTC) reserve news before sliding back to a current week low of $84.70.

The pullback comes despite positive network news that supported last week’s brief return to $100 levels and a new ATH.

Investors Take a Breather after the Breakout Start to March

Last week, the Anchor Protocol (ANC) contributed to increased demand for UST. Anchor, built on the Terra blockchain, is a DeFi platform currently offering annualized percentage yields of close to 20% on Terra stablecoins.

Last month, Anchor Protocol reportedly approached the Luna Foundation Guard (LFG) for $450m to replenish its reserves.

For LUNA, the link with stablecoin TerraUSD (UST) remains the price influence. Anchor protocol news drove LUNA to a new ATH of $104.84 before easing back.

This week, Terra (LUNA) and Terraform Labs founder Do Kwon took to Twitter. Kwon announced plans to build a $10bn Bitcoin (BTC) reserve to set a new Bitcoin standard era.

$UST with $10B+ in $BTC reserves will open a new monetary era of the Bitcoin standard.

P2P electronic cash that is easier to spend and more attractive to hold #btc

— Do Kwon 🌕 (@stablekwon) March 14, 2022

The announcement is aligned with Kwon’s aim to make the Terra Protocol one of the biggest Bitcoin holders. Earlier this month, Do Kwon announced on Twitter,

“The Terra Protocol will be one of the largest holders of $BTC.”

The Terra Protocol will be one of the largest holders of $BTC@saylor beware

— Do Kwon 🌕 (@stablekwon) March 2, 2022

Do Kwon’s goal of $10bn in Bitcoin reserves follows last month’s private token sale.

In February, the Luna Foundation Guard (LFG) raised $1bn in a private token sale. The LFG created a Bitcoin denominated reserve for Terra’s largest stablecoin, TerraUSD (UST). Investors have bought into using the Bitcoin reserve to reduce volatility.

The surge in demand for Terra stablecoins and the use of Bitcoin as a reserve are positives for LUNA.

UST is pegged to the USD. The pegging mechanism involves the issuance and burning of LUNA tokens. At times when the price of UST sits above $1, users can mint UST by burning LUNA. Burning LUNA then reduces the supply of LUNA, which increases the value of LUNA.

LUNA Price Action

At the time of writing, LUNA was down by 0.89% to $86.10.

Technical Indicators

LUNA will need to move through the day’s $87.85 pivot to make a run on the First Major Resistance Level at $89.05. LUNA would need the broader crypto market to support a breakthrough this morning’s high of $86.89.

An extended rally would test resistance at $90 and the Second Major Resistance Level at $91.24. The Third Major Resistance Level sits at $94.66.

Failure to move through the pivot would test the First Major Support Level at $85.66. Barring an extended sell-off, LUNA should avoid a return to sub-$85. The Second Major Support Level sits at $84.47.

Looking at the EMAs and the 4-hourly candlestick chart (above), it is a bullish signal. LUNA will need to break out from the 100-day EMA at $86.31 to support a bullish day ahead.

This morning, the 50-day EMA narrowed to the 100-day EMA, weighing on LUNA. The 100-day EMA also narrowed to the 200-day EMA, bringing support levels into play.

A breakout from the 100-day EMA and a move through the 50-day EMA at $89.10 would support a return to $100 and a run at the ATH of $104.84.