Terra price key support level breaks after 30% weekly drop — more pain for LUNA ahead?
Terra (LUNA) price slid on April 11 as a broader correction across crypto assets added to the uncertainties concerning its token burning mechanism.
Bitcoin (BTC) and Ether (ETH) led to a decline in the rest of the cryptocurrency market, with LUNA's price dropping by over 8% to nearly $91.50, and about 30% from its record high of $120, set on April 6.
The overall drop tailed similar moves in the U.S. stock market after the Federal Reserve last week signaled its intentions to raise interest rates and shrink balance sheets sharply to curb rising inflation.
Arthur Hayes, the co-founder of BitMEX exchange, said Monday that Bitcoin's correlation with tech stocks could have it run for $30,000 next. In other words, LUNA's high correlation with BTC so far this year puts it at risk of more downside if BTC doesn't rebound.
Tale of two exposés
LUNA picked additional downside cues from at least two "exposé" threads that went viral on Twitter over the weekend.
The first thread, penned by a pseudonymous analyst @DeFi_Made_Here on April 7, questioned LUNA's capability to maintain the peg of Terra's native stablecoin, TerraUSD (UST) since it is not itself backed by any tangible asset.
The second thread, published on April 9 by Jack Niewold, an analyst at the Crypto Pragmatist — a DeFi newsletter, accused Terra co-founder Do Kwon of receiving all the LUNA tokens meant to be "burned" to mint UST.
He also alleged that the Luna Foundation Guard, a nonprofit organization that backs the Terra ecosystem, has been using a percentage of burned LUNA supply to buy Bitcoin.
Kwon refuted the claims in a tweet-to-tweet response to Niewold, calling him a "made up clickbait." The self-proclaimed "master of stablecoin" asserted that Terra burns LUNA 1:1 to mint new UST, which can be seen by testing a swap on the Anchor Protocol dashboard.
Jose Maria Macedo, head of crypto research platform Delphi Digital, also rubbished Niewold's thread as "absolutely terrible."
Key LUNA price support breaks
The latest LUNA selloff also led its price below its key moving average support against the U.S. dollar.
Related: Bitcoin plumbs April lows as US dollar strength hits highest since May 2020
In detail, the Terra token dropped below its 50-day exponential moving average (50-day EMA; the red wave in the chart below), now near $90, almost two months after reclaiming it as support.
The latest support-to-resistance flip exposes LUNA to the possibility of extending its downtrend toward its 200-day EMA (the blue wave) around $67 (around 20% lower than today's price) in April.
The 200-day EMA also coincides with the 0.382 Fib line of the Fibonacci retracement graph, drawn from the $4-swing low to the $106-swing high, thus offering LUNA double-layered support against bears.
Conversely, an early rebound from 0.236 Fib line (near $82) could have LUNA retest $106 as its interim upside target.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.