LUNA’s incredible rally took place against the backdrop of a series of positive and negative events. Meanwhile, technical indicators indicate an imminent correction.
Terra became a controversial blockchain project following the demise of its native token LUNA and stablecoin TerraUSD (UST) on May 5. But its recent gains are hard to ignore for crypto traders.
LUNA revived?
After dropping to near zero in May, LUNA is now trading for around $6, a whopping 17,559,000% price increase in less than four months when measured from its lows.
Meanwhile, LUNA’s performance in September was particularly interesting, as it was up more than 300% from the beginning of the month after a long period of almost no movement.
Terra ecosystem in 9 months
It is important to note that LUNA also trades with the code LUNA2 on many exchanges.
Specifically, Terraform Labs, the company behind the Terra project, has divided the old chain into Terra Classic (LUNC) and Terra LUNA 2.0 (LUNA/LUNA2).
Terra Classic is the original version of the Terra blockchain, while Terra LUNA 2.0 was created as part of a reinvention strategy by Terraform Labs founder Do Kwon. In doing so, Kwon and the development team periodically distributed LUNA2 tokens to users affected by Terra’s demise.
LUNA/LUNA2 began pumping on September 9, the day that much had happened inside the Terra ecosystem.
- First, Terra Classic (LUNC) passed governance proposals to add a 1.2% tax on all transactions on its chain during the day. In other words, the proposals would permanently remove 1.2% of LUNC supply from each transaction on the chain.
- Second, Terra’s whistleblower claiming to be FatMan reported a suspicious transaction worth 435,000 LUNA2 tokens to Binance, alleging that the sender was TerraForm Labs.
.@clayop tallied up the numbers – TFL sent a total of $3.9 billion USD (in UST) to exchanges including Binance and KuCoin.
Let the enormity of that figure sink in, and consider how many people's savings that is added up. Crypto's biggest fraud.
No explanation from @stablekwon https://t.co/qc2kCFPMHW
— FatMan (@FatManTerra) September 9, 2022
However, Do Kwon has denied the allegations. The September 9 pump also comes a week after Terra approved a proposal to conduct a second Airdrop with more than 19 million LUNA tokens through Oct. 4.
LUNA Technical Indicators
From a technical perspective, LUNA prices are at risk of experiencing a major correction in the coming days.
- Firstly, on the 4-hour chart, the token’s Relative Strength Index (RSI) rose above 70, which is considered an overbought zone where a correction is more likely.
- Secondly, the price has formed a bearish reversal pattern since September 9.
Notably, a rising wedge forms when the price tends higher inside an ascending range where the upper and lower trend lines converge towards each other.
As of 9/11, LUNA is testing the wedge’s lower trendline for a breakout move. In this case, the price will risk a decrease equal to the maximum height of the wedge.
In other words, LUNA could drop to $4.50, a 30% drop from today’s price.
