Terra buys another $176M worth of Bitcoin — but LUNA crashes anyway

Key Takeaways:

  • Terra adds over 4,000 BTC to its UST-backing reserve.
  • LUNA reversed its late-March gains and declined 18% month-to-date.
  • The token faced a further decline based on bearish technicals.
Terra, Terra buys another $176M worth of Bitcoin — but LUNA crashes anyway
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YEREVAN (Coinchapter.com) – Terra Foundation added another $176 million worth of Bitcoin to the reserve that backs its stablecoin TerraUSD (UST). Nonetheless, the announcement did little in assisting Terra’s native token, LUNA, to recover from its bearish slumber.

Terra’s UST reserve

As of Monday, Terra’s net crypto reserves stood at $1.7 billion, including the freshly-purchased $100 million worth of Avalanche (AVAX). As the platform previously announced, the treasury swap aims to build a “diversified and non-correlated asset pool supporting the UST peg.”

LUNA serves as collateral to maintain the peg between the UST and the U.S. dollar. If the cost to purchase one UST crosses above a dollar, the Terra algorithm burns a portion of LUNA tokens to pare the UST’s price back to $1 by minting more of it.

As CoinChapter previously reported, Terra will burn 60% of the LUNA tokens and use the remainder to purchase Bitcoin, adding BTC-backing to the UST coins in circulation.

Also read: Bitcoin-pegged stablecoins? Terra (LUNA) says yes and buys up $125M in BTC.

However, LUNA reversed its 33% gains since late March and dropped to $88 in Monday’s Asian-Pacific session, hinting at further losses.

LUNA’s bearish technicals hint at a crash

LUNA crashed 26% from its all-time high of $119, established on Apr. 5. Moreover, it faced a further decline toward the resistance-turned-support line at $78, which would constitute a 12% drop for the digital asset.

Terra (LUNA) daily chart. Source: TradingView.com
Terra (LUNA) daily chart. Source: TradingView.com

LUNA’s relative strength index (RSI; momentum indicator) backed the bearish prediction, charting below 50, which typically indicates low expectations from investors. Likewise, MACD, the trend-based oscillator, pointed in the same direction, printing red bars on the histogram.

Also read: Avalanche rallies after Terra adds $100M worth of AVAX tokens to its stablecoin reserve.

Furthermore, the trading volumes on the LUNA/USD chart declined within the previous four days, testifying to the bearish claim. The token’s weekly price action formed a Rising Channel and could bring further gains to the LUNA bears.

Weekly chart

The said channel consists of two parallel trendlines that encapsulate the price action and drive it up while maintaining a steady swing. The setup does not predict a continuation after LUNA breaks in either direction. However, it could be instrumental in predicting consecutive retests of the support and the resistance.

Terra (LUNA) weekly chart. Source: TradingView.com
Terra (LUNA) weekly chart. Source: TradingView.com
Also read: LongHash Ventures Partners With Terraform Labs To Accelerate Web3 Development On Terra Blockchain.

Should the pattern remain relative, LUNA could see a further 35% decline and hit the channel’s support at approximately $55. While the RSI on the weekly chart remained in a bullish position, the MACD indicator hinted at a looming crossover.

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Terra, Terra buys another $176M worth of Bitcoin — but LUNA crashes anyway

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