After falling to historic lows at $1.62, the price of Terra (LUNA2) recovered quickly in nine days.
On June 27, LUNA2’s token rate was $2.77, a 70% increase over the previous low. The token traded 77.35% less than its May 30 record high of $12.24.
LUNA2’s recovery was similar to other retracement moves in the crypto industry, with top crypto assets Bitcoin and Ether (ETH), rising by around 25% and 45% respectively.
Four-hour price chart for LUNA2/USD versus BTC/USD Source: TradingView
Bulls could be caught by the LUNA2 price rise
Bulls could be trapped by the recent buying spree in LUNA2 markets, as it is part of a wider correction trend.
LUNA2 appears forming a “bear Flag” pattern. This is a bearish continuation setup in which the price consolidates upward within a parallel ascending channel following a large downside move.
Bear Flags are resolved when the price falls below the channel’s lower trendsline. Their breakdown is based on technical analysis and takes the price to a level that is equal to the previous downside move (called the “flagpole”) as shown in the chart.
Daily price chart for LUNA2/USD featuring the ‘bull flag setup Source: TradingView
LUNA2, currently trading close to its Bear Flag’s top trendline ($2.40), may experience an imminent pullback towards the pattern’s lower trendline, near $2.
A prolonged price correction, if accompanied with an increase in volume would place LUNA2 at high risk of crashing to $1.30. This is almost half the price it was on June 2.
LUNA2 is dangerous
LUNA’s depressing technical outlook is also influenced by its controversial past.
LUNA2 was created in May to help investors who suffered losses due to the collapse of Terra’s algorithmic stabilitycoin, TerraClassic USD (USTC).
During this time, the nearly-worthless old version LUNA2, called LUNA2, started trading independently as a token under the rebranded brand Terra Classic (LUNAC).
LUNA2 was traded on major exchanges and saw a 483% increase to $12.24. However, all gains were lost in a huge correction move. Quantum Economics founder Mati Greenspan noted that no one in their right mind would invest in LUNA2 following the LUNAC crash.
Daily price chart for LUNA/USD Source: TradingView
This leaves LUNA2 up to hardcore holders who wish to recoup all Terra losses and speculators who desire to bet excessively on its volatile price movements.
Related: Bitcoin prices fall below $21K, while exchanges experience record outflows
These speculations, it is interesting to note, are driving LUNAC’s and USTCs market caps higher.
LUNAC and USTC market caps. Source: CoinMarketCap
LUNAC’s market capitalization has increased by 75% to $594million on June 27, despite it being dead in principle. It was $339 million at the beginning of June 12. The market value of USTC has risen from $13 million up to $96 millions in the same time period.
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