Selloff risks cloud Terra as LUNA rallies over 90% in just eight days

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Key Takeaways:

• Terra’s native token LUNA reached new ATH on Dec 22.
• However, the uptrend sparks fears of sell-offs.

NEW DELHI (CoinChapter.com) — Terra, a blockchain protocol that uses fiat-pegged to power a payments system, is on a roaring rally that has led its native token LUNA to a new ATH on Wednesday.

LUNA prices broke out of a falling wedge pattern before starting its current bull run. The falling wedge pattern forms when an asset’s price paints lower highs and lower lows within contracting trendlines on its charts. Recent corrections inside the wedge pushed LUNA to its 26-day EMA, and 50-day EMA supports.

The Terra token rebounded from its 50-day MA line before breaking out of the falling wedge pattern. However, the rally sparks fears of a downtrend as traders may sell to make profits. Moreover, the Terra token’s relative strength index is in overbought regions, which, in theory, indicates an asset’s uptrend might reverse soon.

The RSI is currently at 71.37, as LUNA’s prices fall from its day’s high. LUNA nearly reached $100 for the first time, capping off $99.19 before prices pared. At present, Terra Luna prices face resistance at $98. If the RSI factor does not induce sell-offs, LUNA might target $106 before pulling back

If LUNA prices fall, the Terra token could fall to $85.7. If the selling sentiment takes hold of the market, LUNA could test $75. However, key support for Terra prices comes from its 26-day EMA line. LUNA would continue to be bullish in the long-term horizon if prices don’t go below the 50-day MA and 26-day EMA supports.

Meanwhile, the trend-based momentum oscillator MACD is strongly bullish for LUNA. Moreover, bars on the MACD histogram expand, suggesting the bullishness is growing stronger.

The histogram bars plot the difference between the MACD line (difference between 12-day and 26-day EMA) and the MACD signal line (9-day EMA of MACD).

Terra Luna Fundamentals

LUNA coin derives its impressive bull run from several factors, including growing UST adoption. UST is Terra’s Stablecoin, pegged to the US dollar. TerraUSD is currently the fourth-largest stablecoin with a market cap of $9.42 billion, having overtaken Ethereum’s DAI.

Moreover, Terra burnt 88 million LUNA from its community pool and swapped it for UST. In addition, the platform’s Total Volume Locked (TVL) rose to $19.58 billion, an increase of nearly $1.5 billion since Dec 21. The increase pushed Terra’s TVL to a new record high, breaking its day-old record.

Data from DeFiLlama indicates that Terra overtook BSC’s second rank without considering assets in Staking and Borrowing. However, BSC retains its second position when staked and borrowed assets are added to the pot.

At the time of writing, LUNA was changing hands at $88.2, up 0.95% on the day. It is likely traders are starting the sell-off to profit from LUNA’s recent uptrend.

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