Key Takeaways:
- Technicals on LUNA daily chart show the possibility of an upcoming rally.
- Terra has important fundamentals to fuel LUNA further.
Yerevan (CoinChapter.com) – Terra stablecoin issue protocol’s governance token LUNA has been consolidating for the past week. However, it might be primed for a new leg up, says a crypto analyst.
Twitter-handle CryptoKaleo based their opinion on LUNA’s visible pattern in the latest uptrend (since July 21).
LUNA’s bullish technicals
CryptoKaleo stated that the governance token could break through the short-term resistance, as it has done throughout numerous “mini-ranges” in the uptrend. The accumulation periods in each of those ranges have been brief. The last one, however, lasted for a week.
Also read: Terra registers record high after burning $185M worth of LUNA in a month.
LUNA consolidated right beneath the $31.6 price line. If the prediction pans out, it will be able to continue the impressive bull run. The LUNA/USD exchange rate stood at 31.1 in the European session Friday, with a 14.5 percent advance in the past 24 hours.
Terra’s “sustenance coin” has gained a whopping 455 percent since July 21. As a result, LUNA’s relative strength index (RSI: purple graph) has been charting through overbought territory over the past month.
Generally, an RSI higher than 70 increases the traders’ fears of betting on overpriced crypto. Thus they might pull their bets and lower the digital asset value in the process. However, according to CryptoCaleo, the digital asset will likely tear through the resistance and continue the uptrend.
Aside from the technical analysis, fundamental factors are backing the bullish claim.
Also read: Terra (LUNA) refreshes record highs as Bitcoin and Ethereum slip.
What’s behind Terra’s rally?
The recovery wave across the crypto market contributed to LUNA’s rally. Bitcoin’s bullish break initiated on July 21, and many smaller coins caught the drift and gained greatly (XRP, ADA, DOGE, SOL, etc.). However, Terra has launched an upgrade that also fuelled the rally.
Dubbed Columbus-5, the upgrade introduced a new token-burning protocol to the blockchain. Before the upgrade, the platform would burn its governance tokens to create stablecoins, but only partially. After Columbus-5 launched, the platform burns all of the LUNA involved, leading to a supply squeeze.
The supply shortage spurred the price. While the burning rate will continue to rise, the price action might follow, taking LUNA to new all-time highs. Additionally, Terra’s most popular stablecoin UST scored a Coinbase Pro listing on August 12, along with wrapped Luna.
While Coinbase did not list LUNA directly, the governance token still benefitted from Terra blockchain’s exposure.
Also read: Ethereum layer-1 alternatives Solana and Terra hit record highs.
