The controversial cryptocurrency Terra (LUNA) saw a significant price surge today, rising over 30% to trade above $0.5. This marks a notable recovery for the token, which infamously crashed from highs of $119 last May to become practically worthless after the collapse of its algorithmic stablecoin TerraUSD (UST).
After its shocking collapse last year that caused billions in losses, Terra (LUNA) faces immense challenges if it hopes to regain trust and traction. Its original blockchain failed due to flaws in its algorithmic stablecoin, and investigations into potential misconduct are still ongoing. The relaunch of a new Terra chain remains contentious. With so much uncertainty and doubt surrounding LUNA, is this rally built on shaky foundations?
According to market analysts, LUNA’s price jump appears to be driven by a combination of factors. Some traders are betting on a renewed bullish outlook, citing Do Kwon’s expected release from detention in late October and the upcoming FTX trial as potential catalysts.
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On crypto markets and social media, excitement is building about LUNA’s upside potential. The token is leading Binance’s top gainers list and broke out of a bearish resistance line that had confined its price action since September 2022. With LUNA also being one of the most heavily shorted tokens currently, analysts say a short squeeze could propel prices even higher.
“In my view, this can be the breakout that patient bulls have been waiting for,” said one of the traders on X (Twitter). “I’m waiting for a daily close above the resistance before calling the breakout a fact. But LUNA has no right to exist after last year’s collapse. This bullish push can trigger a short squeeze event that brings LUNA back up to $2 or more.”
The relative strength index (RSI) for Terra (LUNA) now stands above 70 following the significant price surge over recent weeks. This indicates strong positive momentum that could signal further upside ahead. However, for major cryptocurrencies like LUNA, an elevated RSI reading over 70 can also reflect overbought conditions and the potential for a pullback.
The upward trajectory of LUNA’s RSI curve shows an improving technical picture that aligns with the emerging uptrend in price. In the near-term, the technical outlook appears slightly positive for further gains if the RSI can remain supported at current elevated levels. However, the substantial rally leaves LUNA vulnerable to profit taking in the short-term, which could lead to a temporary correction as the token enters overbought territory on the indicator.
However, many crypto watchers remain skeptical of LUNA’s comeback, given the failures of its original blockchain and questions around its relaunch earlier this year. Regulatory probes related to Terra’s implosion are also still ongoing. The token would need to see sustained support above $0.5 before broader confidence returns.
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