Terra (LUNA) Makes an Early Move to Bring $100 into Play

Key Insights:

• LUNA hit a morning high of $92.38.
• Risk appetite returned in the early hours, supporting the morning breakout.
• Terra stablecoin demand continues to support a LUNA return to $100.

It was a bullish day for LUNA on Sunday, bucking the broader crypto market trend on the day. The rest of the top 10 cryptocurrencies, by market cap, saw losses at the end of the week.

Partially reversing a 2.60% decline from Saturday, LUNA rose by 1.71% to end the day at $87.50. Despite a bullish Sunday, LUNA ended the day at sub-$90 for a fourth consecutive day.

TerraUSD Demand Drives LUNA Back Towards $100

On Thursday, LUNA struck an ATH $104.84. The breakout to a new high was in stark contrast to the broader crypto market.

Bitcoin (BTC) currently sits at sub-$40,000 levels, which is more than 43% off its November ATH of $68,979. Things have not been much better for Ethereum (ETH) and the broader crypto market.

The link with stablecoin TerraUSD (UST) remains the price influence 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.

Over the last week, the Anchor Protocol (ANC) has 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.

In late February, LFG was also in the news for raising $1bn in a private token sale. The LFG created a Bitcoin denominated reserve for Terra’s largest stablecoin, TerraUST. Investors 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.

LUNA Price Action

At the time of writing, LUNA was up by 6.50% to $93.19.

Technical Indicators

LUNA will need to avoid a retreat through the First Major Resistance Level at $90.42 to support a run at $100. LUNA would need the support of the broader market, however, to break out from the Second Major Resistance Level at $93.19 and this morning’s high $93.67.

An extended rally would test the Third Major Resistance Level at $99.78 and resistance at $100.

A fall through the First Major Resistance Level at $90.42 and the pivot at $86.85 would bring the First Major Support Level at $83.94 into play. Barring an extended sell-off, LUNA should steer clear of sub-$85 and the Second Major Support Level at $80.40.

Looking at the EMAs and the 4-hourly candlestick chart (above), it is a bullish signal. LUNA continues to hold above the 50-day EMA currently at $89.58.

This morning, the 50-day EMA has pulled away from the 100-day EMA, delivering strong support. The 100-day EMA has also pulled away from the 200-day EMA, bringing $100 levels into play.

Avoiding the 50-day EMA would support a return to $100 and a run at Thursday’s ATH $104.84.