Terra prices ink 75% gains in February — more gains for LUNA ahead?

Terra gained nearly 50% over the last week. Image from freepik
Terra’s LUNA token gained nearly 50% over the last week. Image from freepik

Key Takeaways:

  • Terra’s LUNA token re-entered its six month ascending channel after gaining 47% over the past week.
  • Increased demand for UST and LUNA burns seem to be propeling prices.

NEW DELHI (CoinChapter.com) — Terra Labs’ native token LUNA enjoys an extended bull run that saw its prices increase by 64% before profit booking pared some of the gains. As a result, LUNA prices re-entered an ascending channel they had broken below in January.

Despite the wider crypto market correlating with the traditional markets, falling in response to Russia-Ukraine tensions, LUNA remained strong to end Feb up by more than 75%.

A likely reason for the uptrend stems from the growing demand for Terra’s stablecoin, TerraUSD (UST). Terra’s algorithm burns LUNA tokens to mint UST; hence increased demand for UST would burn more LUNA.

In theory, burning a token decreases its active supply and helps increase its prices, given demand for the token remains the same. For example, Chinese crypto-journalist Wu Blockchain noted that the protocol had burned more than 29 million LUNA in three weeks in a tweet.

Demand for the Terra Stablecoin is increasing.
Demand for UST is rising. Source: Terra Analytics

UST’s total supply rose by 15.3% in the same time frame, from 11,256.4 million on Feb. 8 to 12,981 million on Mar. 1.

Also Read: Terra’s LUNA to reach $200 by year-end, says analyst.

Previously, Terra burned only a part of the tokens users provided for UST. However, with the introduction of the Columbus-5 update, Terra burns 100% of the LUNA tokens used for minting UST. As such, increasing UST demand impacts LUNA supply and prices more.

LUNA Re-Enters Ascending Channel

LUNA’s recent uptrend helped the token re-enter its August 2021 ascending parallel channel. Since Monday, the Terra token has jumped 35.2% from Feb. 28’s low of $70.48 to reach an intraday high of $95 on Mar. 1.

The uptrend also brought LUNA above its 50-day, 100-day, 200-day MA trendlines. As such, the Terra token is bullish across all time horizons.

Moreover, the Terra token charted a golden cross on its daily charts, with its 26-day exponential moving average (white wave) moving above its 50-day moving average (purple wave). In detail, the golden cross usually indicates a short-term uptrend for an asset.

LUNAUSD on the daily charts with MACD. Source: Tradingview.com
LUNAUSD on the daily charts with MACD. Source: Tradingview.com

If the Terra token continues to rally, prices would likely flip immediate resistance at $96.2 before challenging resistance at $105.8, near its ATH of $106.3. Moreover, if LUNA prices trace their previous price action inside the channel, the token could reach $117.8 before prices pare.

Moreover, momentum oscillator MACD is forecasting strong bullish signals, as the MACD histogram shows. In detail, the histogram charts the difference between the MACD line (12-day and 26-day EMA difference) and the MACD signal line (9-day EMA of MACD).

Also Read: LUNA price jumps 17% after Terra raised $1B for Bitcoin-denominated stablecoin reserve.

Currently, the histogram bars are expanding in the positive direction, indicating the MACD line is moving away from its signal line.

Terra’s Overbought RSI Creates Downside Risks

Meanwhile, Terra’s relative strength index has crossed into the overbought region, clocking $74.77 on the daily charts.

In detail, an overbought RSI suggests an asset is likely to reverse its bull run. Despite bullish cues from the Golden cross, LUNA would likely halt its uptrend for some time. If LUNA declines, bulls will consolidate above immediate support near $81.

LUNAUSD on the daily charts with RSI. Source: Tradingview.com
LUNAUSD on the daily charts with RSI. Source: Tradingview.com

However, if Terra breaks below immediate support, LUNA would fall below the ascending channel support to reach $73. Finally, 26-day EMA and 100-day MA (yellow wave) form support confluence near $66.5.

At the time of writing, LUNA was trading at $93.2, up 1.91% on the day.

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Terra, Terra prices ink 75% gains in February — more gains for LUNA ahead?

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