Can Terra’s LUNA 2.0 price pump back to $30?

• LUNA 2.0 price has crashed 88% after reaching an all-time high at $30 on Saturday right after the launch.
• Despite the recent mishap, Terra (LUNA) has a chance at rallying 185% due to mean reversion.
• A breakdown of the $3.50 support level will create a lower low and invalidate the bullish thesis.

LUNA 2.0 price is consolidating below the midpoint of the recently formed trading range after the airdrop from last Saturday. Investors are advised to remain patient and wait for a directional bias to develop before getting into new trading positions.

Also Read: Here’s the list of crypto exchanges that will support Terra’s LUNA hard fork

How the TerraUSD (UST) de-peg crash transpired

Trouble and doubt first began for LUNA when Terraform Labs founder Do Kwon made a public bet of $1 million with a Twitter user Algod that the price of LUNA would be higher than on the date of the bet, March 14.

Soon after GCR, another Twitter user, joined hands with Algod and ponied $10 million for the bet, which Do Kwon accepted and matched. Since then, the crypto space has been torn into two sects – those that support LUNA and its ecosystem and those that want to see it fail.

As the first weekend of May rolled up, the Terra crash unfolded as the peg between LUNA and the stablecoin UST started to fall apart. On May 7, the UST-USDT peg dropped 1.30% and the founder tweeted, 

After this, it was a death spiral that caused panicking investors to start a bank run on UST, which flooded the market with LUNA, causing its market value to plummet. As LUNA price nosedived to zero, there was radio silence for a while, until Do Kwon, announced the revival plan to launch LUNA 2.0.

Terra’s recovery plan: Airdrop to LUNA and UST holders

After the initial deliberation and scurrying, the recovery plan for a LUNA 2.0 was approved and launched on May 28, while the focus on Luna Classic (LUNC) was abandoned. The airdrop was split into: 

• 30% as a community pool
• 35% to pre-attack LUNA holders
• 10% to pre-attack aUST holders
• 10% to post-attack LUNA holders

While the eligible holders received 30% of the new LUNA 2.0 tokens through an airdrop, one interesting sentence in the proposal eluded many investors,

All tokens locked or vesting are staked at genesis, and must be unbonded to become liquid.

This created a momentary uncertainty among investors, but the founder Do Kwon cleared the doubt by tweeting,

So far, things are not looking good for LUNA 2.0 price as it has collapsed 88% from its all-time high at $30, but the future looks interesting and holds promise.

LUNA 2.0 price ready for a reversal

LUNA price rallied 5,900% after a successful reboot on Saturday, May 28 and set a new all-time high at $30. This run-up, while impressive, was brief, leading to a reversal and an 88% crash that set a swing low at $3.50.

A quick run-up after this move created a swing high at $10.22, which essentially is the range that LUNA 2.0 price has been hovering inside of over the last two days. As this coiling up continues, there is a good chance for Terra bulls to band together and trigger a massive rally.

The reason behind this bullishness is that assets tend to revert to mean after a massive move (in either direction). In the case of LUNA price, such a mean reversion is likely to be higher given the 88% crash witnessed recently and because the decline was so sharp it seems likely the recovery will be equally sharp and come over the next few days. 

A recovery above the 50% retracement level at $6.86 will be the first confirmation of this bullish move. Following this, LUNA price could make a move for the range high at $10.22. However, for the mean reversion to occur, Terra must head back to the midway point of the 88% crash, which gives us a theoretical target of $16.75. 

Assuming the run-up does occur, it would amount to a 185% gain from the current position and is likely where the upside is capped for the altcoin. However, considering the massive uncertainty in the market due to Bitcoin’s consolidation, a move to its all-time high at $30 seems unlikely.

LUNA/USDT 4-hour chart

While the mean reversion theory makes sense from a technical perspective, it will be ultimately judged by Bitcoin’s directional bias. 

If the big crypto undergoes a sell-off, LUNA price is likely to follow its lead. If bears produce a lower low below $3.50, it will invalidate the bullish thesis and suggest that a further descent is a more likely outcome.

Where is Bitcoin price heading next? 

In the following video, FXStreet analysts evaluate Bitcoin price action to determine where it will go next and whether altcoins will move in the same direction: