- SOL and LUNA prices hit all-time highs
- Investor confidence in the DeFi ecosystem, especially layer 1 solutions, remains strong
- Market demand for scalable decentralized solutions increasing
- SOLUSD and LUNAUSDT heavily overbought
JAIPUR (Coinchapter.com) – Native blockchain assets of Ethereum layer-1 alternatives Solana and Terra recorded all-time high prices on Tuesday.
The SOL/USD and LUNA/USDT pairs rose 42% and 38%, respectively, in near-vertical rallies that started on Sunday. As a result, SOL prices topped $75, while LUNA achieved a high of $26.7 in the ongoing London session.
Both smart contract underpinning tokens rallied on increased bullish sentiment in cryptocurrency markets. And belief in the DeFi sector’s long-term prospects. Investors assessed the high demand for scalability among DeFi platforms.
SOL and LUNA, as a result, gained attention and liquidity infusion due to the immense scalability quotient of their respective platforms.
But Why The Massive Pump?
While NFT and decentralized app (dapp) users concurred about Ethereum’s transition delay from Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus mechanism, Solana’s development team went ahead and released Wormhole.
The official website says Wormhole is a “bidirectional, decentralized ERC-20 ⇄ SPL token bridge between Ethereum and Solana”. Wormhole intends to capitalize on the interoperability and intercommunication that has gripped the blockchain ecosystem.
“Asset bridges are nothing new – but Wormhole takes the concept further by supporting arbitrary data. This allows for any information to move cross-chain, be it oracle data, governance votes, NFTs, and much more.said a tweet on Solana’s offcial Twitter handle
SOL buyers bought the news surrounding the development, especially since Wormhole integrated in-built support for Solana, Ethereum, Terra, and Binance Smart Chain during launch.
Meanwhile, LUNA prices jumped as bulls hotly anticipated the launch of the Columbus-5 network upgrade. The said update will go live in a few weeks from now. And will allow platforms users to leverage Ether (ETH) as collateral on Anchor, Terra’s native lending and saving medium.
LUNA derives its use case from stabilizing stablecoin pegs within the Terra ecosystem. The protocol burns LUNA tokens every time a “peg-stabilization” request shows up. ETH’s introduction as collateral indicated growth in Anchor’s TVL (total value locked). And a rise in demand in UST, Terra’s native US dollar-pegged algorithmic stablecoin.
More demand in UST translates to an equivalent burning of LUNA tokens to keep the 1:1 peg factor in check. More burning, in turn, diminishes LUNA’s supply, hence propping up prices.
Plus, Coinbase listed wrapped luna (WLUNA), an ERC-20 token that’s designed to track LUNA’s value, and UST last week. Coinbase listings in the cryptocurrency space are generally seen as bullish indicators.
Solana And LUNA Heavily Overbought
But the bullishness may be fleeting, as aggressive buyers pushed both SOLUSD and LUNAUSDT pairs far into the overbought territory. As a result, relative strength index (RSI) readings for both pairs clocked 88.27 and 89.05, respectively.
Both SOL and LUNA rallies stand unsustainable and prone to significant retracements on bullish exhaustion. A course correction bout could drag down the SOLUSD pair below $55 to $48.4.
For LUNAUSDT, a drawdown would mean a drop to sub-$20 price levels, possibly $18.7 and $16.2.