The price of Terra (LUNA2) has recovered sharply nine days after falling to its historic lows of $1.62.
On June 27, LUNA2’s rate reached $2.77 per token, thus chalking up a 70% recovery when measured from the said low. Still, the token traded 77.35% lower than its record high of $12.24, set on May 30.
LUNA2’s recovery mirrored similar retracement moves elsewhere in the crypto industry with top crypto assets Bitcoin (BTC) and Ether (ETH) rising by approximately 25% and 45% in the same period.
The recent bout of buying in the LUNA2 market could trap bulls, given it has come as a part of a broader correction trend.
In detail, LUNA2 appears to be forming a “bear flag” pattern, a bearish continuation setup that appears as the price consolidates upward inside a parallel ascending channel after undergoing a large move downside.
Bear Flags resolve after the price breaks below the channel’s lower trendline. As a rule of technical analysis, their breakdown takes the price to the level at a length equal to the size of the previous downside move (called “flagpole”), as shown in the chart below.
LUNA2, now trading near its Bear Flag’s upper trendline (~$2.40), could undergo an imminent pullback toward the pattern’s lower trendline near $2.
If accompanied by an increase in volume, an extended price correction would put LUNA2 at risk of crashing to $1.30, down almost 50% from June 2’s price.
LUNA’s depressive technical outlook also takes cues from its controversial history.
Notably, LUNA2 came to existence in late May as a means to compensate investors who had suffered losses during the collapse of Terra’s algorithmic stablecoin, now called TerraClassic USD (USTC).
Meanwhile, the almost-worthless old version of LUNA2, named LUNA, started trading as an independent token under the revamped brand called “Terra Classic (LUNAC).”
LUNA2 opened across major exchanges with a 483% spike to $12.24, only to give up all the gains in a massive correction move later. Mati Greenspan, the founder of crypto research firm Quantum Economics, noted that nobody in their right mind would want to invest in LUNA2 after the LUNAC collapse.
That leaves LUNA2 in the hands of hardcore holders who want to recoup their Terra losses entirely and speculators who want to place excessively leveraged bets on its day-to-day volatile price moves.
Related: Bitcoin price dips under $21K while exchanges see record outflow trend
Interestingly, such speculations are also leading LUNAC and USTC’s market cap higher.
The market capitalization of LUNAC, despite being dead in theory, has risen by 75% to $594 million on June 27, after reaching as low as $339 million on June 12. Similarly, USTC’s market valuation has rallied from $13 million to $96 million in the same period.
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