Terra LUNA is the latest crypto asset to hit the top of the watchlist as its meteoric rise may be due for a breather. Is a retracement in the cards and if so, is that the start of a bearish reversal or another buying opportunity?
Is a LUNA Pullback in the Cards for September?
Today we’re checking out LUNA, the native token for the Terra blockchain, a fast up-and-coming layer 1 blockchain project focused on stablecoins and decentralized finance. For more information on Terra LUNA, and the development team, Terraforms Labs, you can start with their site at https://www.terra.money/. They also post project updates on medium.com/terra-money, so you can go more in-depth there with the different protocols within the Terra ecosystem.
The buzz on the Terra ecosystem has grown louder in 2021, which is likely the market’s response to recently released projects like the Anchor protocol (a money market app) and the Mirror protocol (a synthetic asset and yield farming app). What’s attractive about these systems is not only the juicy yields seen (currently a near 20% yield on Terra stablecoins in Anchor), but also the ease of use. For more on how the ecosystem works seamlessly between the different projects, check out “A Farmer’s love story featuring Terra Luna | Full DeFi Guide” by danku _r at medium.com.
Given that the amount of interest has exploded from not only retail users and investors but also big boy players like Delphi Digital, Galaxy Digital and Pantera Capital, it shouldn’t be any surprise that the LUNA token has massively outperformed the rest of the major layer 1 blockchain tokens since the great crypto crash back in May. Check out the chart below:
And despite the rocket ride higher for Luna hodlers, the Terra Ecosystem’s story is only just getting started. With major system upgrades ahead (among other features Columbus-5 will allow LUNA stakers to collect transaction fees), blockchain interoperability, and the ability to use other assets as collateral on Anchor, odds are growing that interests in Terra will continue to stay high. So, it’s a good idea to throw LUNA onto the watchlist for a potential longer-term play and to do more due diligence on, especially considering we’ve barely scratched the surface on the Terra ecosystem in this post.
The short-term risk is that we may finally see a pullback from the massive gains in September, possibly a reaction to the recent announcement of delay to the Columbus-5 update and/or the seasonal bearishness we tend to see in the financial markets during this time of year, especially in bitcoin and the crypto markets. If the market does pull back in the next few weeks, we’re watching the $27 handle in LUNA/USD for potential support patterns, an area that held in August as seen below.
If this area holds once again, the fundamental story remains positive, and the major network upgrades go off without a hitch, it may make sense to build a position if you’re bullish on LUNA; both swing and longer-term depending on your trading/investing style.
But if the story changes, either on Terra or in the broad risk sentiment/macro landscape, a break below the rising trendline may draw in momentum move lower from the likes of profit takers or short-term traders. We’ll keep that scenario in mind and manage risk accordingly.
What do you guys think? Is LUNA a buy longer-term? Will we see a seasonal dip in the financial markets or another Terra update delay to drag LUNA lower?
Let me know in the comments below, and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.