Terra (LUNA) resumed its upward march this week as its price per coin rebounded by more than 30% in three days.
The price of LUNA rose to around $100 on March 9 after a 15% intraday rally, nearing its record high of $106 since December 2021. At its week-to-date (WTD) low, Terra Token was trading at $75.60.
More than 120 million LUNA have already been burned
The recent buying in Terra Market appeared to be partly due to a similar recovery elsewhere in the crypto market. For example, Terra’s major competitor in the smart contract space, Ethereum, saw Ether (ETH) increase by 13.50% over the same period. Similarly, Bitcoin (BTC) also jumped over 14% from its WTD lows of $37,200 below.
Defense Capital founder Arthur Cheong indicated on Wednesday that the price of LUNA has increased as Tera is a decentralized stablecoin market valued at least $1 trillion or more via its native US dollar-pegged token, TeraUSD (UST). Has the ability to occupy space.
The total addressable market size for a true decentralized stablecoin is at least a few trillion dollars.$luna
— Arthur ️ (@Arthur_0x) 9 March 2022
Notably, the supply of UST tokens exceeded 1.4 billion on Wednesday, an all-time high, according to data provided by Smart Stake. At the same time, the Terra Protocol has permanently removed 120 million LUNA tokens from supply.
In short: LUNA maintains the dollar peg of the UST. Therefore, if the price of the stablecoin crosses $1, the Terra Protocol burns the LUNA and creates a more stablecoin. Similarly, if the price of UST falls below $1, the valuation of LUNA declines in tandem due to the bearish burning mechanism.
Thus, increasing UST supply is likely to propel the price of Luna in addition to a broader recovery in the crypto market.
Terra TVL reaches all-time high
The benefits of LUNA were also visible against the backdrop of more capital inflows into the Terra ecosystem.
The total value locked (TVL) inside the Terra Protocol increased from about $18 billion earlier this year to $25.58 billion on March 9, an all-time high. In this, the total locked LUNA tokens increased from 215.80 million to 298.89 million in the same period.
According to data resource Staking Rewards, Terra has also emerged as the most staking asset among all cryptocurrencies in the 24-hour adjusted time frame, with over $35.75 million worth of LUNA tokens now locked across multiple platforms.
What’s Next for LUNA Price?
While LUNA is set to set a new record high this week, its longer-term technical indicators suggest the potential for downside risk.
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For example, LUNA/USD has shown a clear bearish divergence between its rising price and falling momentum, as indicated by its weekly Relative Strength Index (RSI) – since the beginning of 2021 in the following chart – In the chart below.
Similarly, volumes associated with LUNA’s recent weekly price rally also appeared weak, further suggesting that the underlying upside momentum may be stalling. If this happens, LUNA is likely to undergo a sharp pullback to test its exponential moving average (EMA), mainly the 20-week EMA (~$64) and the 50-week EMA (~38) as support. will take the risk.
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