It looks like we’re seeing bullish support for the crypto markets to start off the new week, bringing Terra (LUNA) back to the top of the watchlist with a potential longer-term setup.
Will the retest of the previous major consolidation area end the deep pullback on LUNA/USD?
LUNA/USD: Daily
LUNA/USD Daily Crypto Chart
Back in early January, we checked out Terra (LUNA) as it was dipping with the rest of the crypto market, and pointed out a possible price action scenario for LUNA if broad risk sentiment continued to sour.
Since then, it looks like that scenario has played out as risk assets like crypto continued to fall through January and early February. With LUNA in particular, the bears were able to push the market to the $50 – $60 area we pointed out to watch in our last post.
Now that the market has made it here, the questions of whether or not the pullback is done and if the market is ready to resume the longer-term uptrend should be revisited.
Fundamentally, the Terra project and ecosystem continues to give bulls positive headlines to work with, including UST adoption across the major layer-1 blockchains and DeFi protocols (Avalanche, Fantom, Curve, etc.), as well as growing centralized exchange listings like on Binance.
We also saw news of a major league sports partnership proposal to the Terra community (40 Million UST to Fund a Terra Brand Partnership) that would potentially increase mainstream exposure, and a recent web3 study showing that the Terra ecosystem grew its full-time developer count by over 300% in 2021.
The bearish fundamental arguments are few and far between, and mainly its LUNA’s correlation to broad macro moves. That focus has been on the high inflation environment and expectations of a global monetary policy tightening regime to combat high inflation conditions, going back to early December.
With those fears likely priced in now that many central banks have given statements over the last couple of weeks, and with no related major catalysts seen for the next few weeks, it’s possible that the broad crypto support we’re seeing so far this week may be the short-term support crypto bulls have been looking for.
If so, this $50 – $60 range may hold on LUNA/USD, and with a potential long invalidation area right below that rising trendline vs. targeting the November highs, we’ve got a solid potential reward-to-risk scenario in the works.
When all put together, this may draw in both swing to longer-term traders/investors, raising the odds of the uptrend resuming, especially if rate hike fears ebb in February.
But what do you all think? Is LUNA a buy? Or is this just a bounce and more pain is ahead for risk-on traders? Let me know in the comments section below!
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.