In the current market correction, we saw how resilient altcoin projects with special talents like Ripple (XRP) and Terra (LUNA) are. Interestingly, the top 10 cryptos such as Bitcoin, Ethereum, Cardano, Solana and Avalanche lost double-digit value compared to last week, while XRP and LUNA were evaluating this process on the upside. A popular crypto analyst thinks the end is near for LUNA. Let’s take a look at the details of these analyzes, keeping in mind that the estimates are not precise.
“This altcoin may correct violently”
According to a prominent crypto investor, one of Ethereum’s strongest competitors is expected to make a major corrective move. The Twitter analyst, nicknamed Light, shared to his 149,400 followers that he shorted Terra (LUNA) with a price target of $51. He believes that due to the Terra-based stablecoin TerraUSD, the DeFi payment network will suffer. Light interprets the following technical chart:
My short LUNA/USDT position starts at $98. Setup breached due to failure of double top hit in altcoin bear market.
Terra is a Blockchain network that allows users to burn native cryptocurrency LUNA to create stablecoins like TerraUSD (UST). UST investors can exchange their stablecoins for LUNA or invest with the lending platform Anchor Protocol (ANC) and earn a 19.5% annual return (APY). According to the analytics firm IntoTheBlock, whose data we share as Kriptokoin.com, Anchor Protocol’s borrowing rate for UST is 13% to maintain over 20% APY.
Why does the analyst choose a short position?
Light believes that due to the current negative attitude in the crypto market, investors will be hesitant to borrow UST, which makes Anchor Protocol’s 19.5% APY unsustainable in the long run. Investors can then convert their UST to LUNA to sell their top Ethereum (ETH) competitor.
LUNA is trading for just under $90 at the time of writing. A move towards Light’s target would mean a possible drop of about 41%.
Recent developments from Terra
In recent developments from the altcoin project, Do Kwon, CEO of Terraform Labs (TFL), said Terra developer is trying to keep the economy of the seventh largest cryptocurrency 1, He announced that he contributed 12 million LUNA worth $2 billion:
Luna Foundation Guard (LFG) received an additional 12 million LUNA from TFL…The cash will be burned to create the UST before it is used to expand LFG’s reserves. This represents an increase of 1.2 billion inflows to UST reserves at current prices.
When demand for borrowing is minimal, Terra uses UST reserves to pay off her high APY.
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