Terra (Luna) crypto down by over 70%: Will it dip more?

Highlights

• Terra on Wednesday has now lost over 70% at the time of writing, and its drop is essentially the result of market bearishness which seems to have put too much pressure on both LUNA and TerraUSD (UST).

• LUNA lost almost 92.5% of its value ever since it achieved its all-time high on 5 April.

• The 29th ranked LUNA was currently trading at US$9.09 with a 24-hour trading volume of US$9,20,08,43,664, according to CoinMarketCap.

Terra's (LUNA) nightmarish run in the crypto market continued on Wednesday, mirroring the overall sentiments of the crypto market. The overall market cap slipped from US$1.46 trillion to US$1.41 trillion on Wednesday mainly due to the growing panic over inflation across the world and recession fears. Luna was one of the biggest losers of the day on Wednesday (7 am GMT) and this was reflective on the drop in overall crypto market cap.

On Wednesday, Terra lost over 70%, and its drop is essentially the result of market bearishness. This seems to have put too much pressure on both LUNA and TerraUSD (UST), with UST losing its dollar peg for the second time in three days. On 10 May, the UST's price nosedived to a low of US$0.68, creating panic in the market.

Also read: 3 times Bitcoin bounced back after a dip. Is there a ray of hope?

This did not only affect the price of UST, but LUNA too lost almost 92.5% of its value ever since it achieved its all-time high on 5 April.

LUNA is struggling for momentum 

The fiat-pegged stablecoin protocol, which aims to offer price stability, is struggling for momentum at the moment. With the market sentiments being largely bearish, the LUNA price has seen a drastic fall in the last 24 hours, resulting in a loss of 72% on 11 May.

The 29th ranked LUNA was currently trading at US$9.09 with a 24-hour trading volume of US$9,20,08,43,664, according to CoinMarketCap. This is a drastic fall because just a month back, it was priced at over US$119 (5 April). The charts indicate that LUNA bears have significant control at the moment over the bulls.

Image credit: Trading View

The UST losing its dollar peg coupled with bearish sentiments has resulted in RSI dropping to a low of 15.79, with the chart indicating that the investors are in a massive sell-off mode at the moment. 

Also read: Can Numeraire (NMR) crypto buck its bearish trend?

Even the MACD (Moving Average Convergence Divergence line) indicated that bears are proving too much stronger for the bulls to resist. The MACD line (in blue) shows a significant gap between the signal line (in orange) and would perhaps take a massive rally to pull itself up the ladder.

To make matters worse, leading exchange Binance announced that it would be stopping the withdrawals of LUNA until it the network is deemed stable. 

Having said that, not all seems to be lost at the moment. LUNA's 50, 100 & 200 EMA (exponential moving averages) then it does indicate that it may be able to make up for some lost grounds and eventually achieve US$78.55, US$78.74, and US$69.59 going forward.

Stablecoin regulations 

The recent developments have now resulted in Treasury Secretary Janet Yellen once again voicing her opinion about stablecoin regulations.

Yellen said that although stablecoins bring in innovations, they pose significant risks to the financial system. Citing its urgency, Yellen said the Congress should pass the stablecoin legislation by the end of the year.

Conclusion 

Overall, Terra's decline has increased the uncertainty and has set fear within the investors as to how will UST and other stablecoins be able to regain trust in the present scenario. With the market navigating through an intense period of uncertainty, investors must take each step after careful consideration and do their market research before entering the market.

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