Terra’s LUNA is approaching a crucial support level that could define its future price action. As the macroeconomic outlook worsens, LUNA is at risk of a steep decline.
Terra is at risk of a downturn as market participants grow fearful about the global economic outlook.
The Layer 1 blockchain’s LUNA token has retraced by more than 10% over the past 24 hours, dipping from a high of $87.80 to a low of $78.80. The bearish impulse commenced Thursday after the Bank of England increased U.K. interest rates from 0.75% to 1% and predicted 10% inflation by the end of the year. On the same day, the Luna Foundation Guard made its biggest Bitcoin purchase yet, adding 37,683 Bitcoin to its reserve fund.
The nonprofit organization announced that it had bought more Bitcoin with the help of Genesis Trading and Three Arrows Capital, bringing its total reserves to around 80,394 Bitcoin. In the past, the Terra-linked foundation’s Bitcoin purchases have instilled confidence in the market and helped LUNA soar to new highs. However, amid a bleak macroeconomic outlook, LUNA failed to react to the latest update.
From a technical perspective, the token looks like it’s in trouble. It recently formed a head-and-shoulders pattern on its daily chart, anticipating a bullish-to-bearish trend reversal. A sustained close below the pattern’s neckline at $77.70 could result in a 35% correction, potentially sending prices below $50.
Due to the current market conditions, LUNA is at risk despite LFG’s ongoing Bitcoin spending spree.
Still, the pessimistic outlook could be invalidated if bulls succeed in pushing prices beyond the $94 resistance levels. Breaching this significant supply wall could encourage sidelined investors to re-enter the market, which could help the token revisit its previous all-time high. LUNA hit $119.18 on Apr. 5. It’s since shaved off around 32.8%, trading just above $80 at press time.
Disclosure: At the time of writing, the author of this piece owned BTC and ETH.
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