At the beginning of 2022, there was a massive pullback in the price of cryptocurrencies. Even popular coins such as BTC and ETH were affected, with several holders selling their coins.
One coin that didn’t suffer such pullback was LUNA. The altcoin witnessed a steady surge in price while others dropped.
As of the time of this report, Terra’s LUNA seems to have lost its resilience and is dropping fast.
Price Analysis Of LUNA
The altcoin price is currently below $50 and fluctuates around the $44 benchmark. LUNA has recorded a 35% loss in just one week.
At the start of January, LUNA’s price was between $90 to $100. Now, Terra’s LUNA has dropped by almost 50%. The market is bearish at the moment though it has stabilized around $44.
LUNA price prediction. Source: TradingView
Possible Reason For The Free Fall
The free fall and adverse reaction experienced by LUNA could result from its ties with MIM (Magic Internet Money).
Also, Abracadabra, one of Terra’s partners, has ties with wonderland. Abracadabra exchanges UST for MIM. This MIM is later used to bet on Wonderland to generate over 13000% APY.
According to Colin Wu, a crypto-journalist, the mechanism of UST is in such a way that LUNA’s price depends on the amount of $UST locked away. This means Magic Internet Money (MIM) is a threat to the ecology of Terra.
Will Terra Rise Anytime Soon?
With the market fall, it is difficult to tell if the coin will break over the resistance and increase again. Currently, there is so much news flying about concerning the relationship between Terra and Anchor Protocol.
Most of the demand for UST, Terra’s stablecoin, is generated by Protocol. Anchor Protocol allows traders to use $ETH or $LUNA as collateral to get more $UST. The platform also allows users to earn UST.
Last week, Anchor implemented some corrections on the platform. The organization announced its intention to increase the value of LUNA LTV to 80%. This increment is to raise the capital efficiency of bLUNA, which will allow for the generation of more revenue from collateral. It will also make the LTV ratio of the lender more competitive compared to that of other lending protocols. In simple terms, people will be willing to borrow more.
Though the market looks terrible for LUNA, remember the coin has recorded tremendous growth from below $25 to $100. The highest price the coin has touched is the $100 mark. Let’s see how things unfold in the months to come.
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