Terra (LUNA), the native token on the namesake blockchain, fell to a more than one-month low this week after a price shock generated by the release of 10 million tokens into circulating supply.
This week, the token has plummeted 14% and is trading near a one-month low of $81.34. This week, it is also one of the worst-performing cryptocurrencies.
A contribution of 10 million LUNA tokens to the Luna Foundation Guard accounts for the majority of the token’s losses (LFG). Terraform Labs, the project’s principal developer, provided the donation, which will be used to increase the LFG’s stablecoin reserves.
LFG’s reserves, which back the stablecoin UST, are valued roughly $2.45 billion, with Bitcoin accounting for nearly 70% of the total (BTC). The LUNA gift was recently used to purchase extra BTC for the reserve by the community.
However, the 10 million LUNA tokens came from Terraform’s non-circulating reserves. LUNA prices were deflationary after they were released into active, circulating supply. The price of the token dropped by nearly 6% as a result of the donation.
Steep correction for LUNA?
While updating his outlook on ETH, a well-known crypto strategist and trader predicts a significant correction for Ethereum competitor Terra (LUNA).
In a recent strategy session, pseudonymous analyst Cred claims that after printing a new all-time high of roughly $120, LUNA may have printed a gigantic bull trap.
He refers to the price structure as a failed range-high breakout. The range low is your usual aim for that. Only if the range high is recaptured or if price approaches the range low does your bias change.
According to Cred, LUNA may offer some support around $60, but the bottom of the range is close to $40, implying a potential drop of more than 50% from its current price of $80.70.