LUNA is a blockchain used for launching algorithmic stable coins and is now among the top DeFi platforms when it comes to total value locked up in circulation.
LUNA has been trending higher over the last few days, but it gained even more momentum over the previous 48 hours. By closing 40% greater, LUNA was among this past week’s biggest gainers.
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The news that Luna Foundation Guard (LFG) created a Bitcoin-denominated reserve has caused markets to react positively. This will act as an extra layer of stability and security for Terra USD, which is currently struggling with sharp fluctuations in prices due to its low liquidity status on exchanges.
LFG has announced that it will be investing $1 billion towards building up its Bitcoin reserves. The best part about this news? All of LFs’ coins are locked for 4-years, which means they won’t be able to trade until after those periods. This increases investor confidence across multiple platforms, including LUNA, with demand rising accordingly. Because investors look for safe-haven assets during these uncertain times.
The recent move by the US Treasury to create a Bitcoin reserve is being met with rave reviews from analysts and experts. As a result, this new development should lower price fluctuations for UST.
The Mechanism
UST is a stablecoin fixed to the US dollar via an algorithm. Unlike other centralized cryptocurrencies, it isn’t backed by anything but Luuna (the company behind them). If prices fall off their peg and go lower than $1 per token, UST can be swapped for LUNA (which is minted). And can be sold for $1, providing arbitrage gains for investors. The opposite happens when demand increases; burning more luna means higher prices because there’ll be less overall supply coming into circulation.
Terra’s introduction of a Bitcoin reserve could be seen as the next important step in reducing volatility within its ecosystem. This is because it reduces the correlation between UST and bitcoin. This means that if traders want to swap out their coins for different assets, they will have plenty available with this new addition.
Is It Worth Buying LUNA Now?
LUNA’s price has been on an upward trend recently, and it was trading at $74.34 on February 26th, 2022. The coin increased13% in 24 hours.
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LUNA is currently trading just below the $77.17 weekly support level, with a strong uptrend since February 24th. So keep an eye on this one – it might be time to buy more shares before they climb higher in future updates.
If you’re looking to invest in crypto, buying volumes increase, and Luuna is a good bet. The altcoin has been pushing through recent resistance levels with ease. In fact, it could test prices above $90 before the end of February.
With LUNA currently trading in a strong uptrend, the crypto is not too late to turn bearish. If this happens, investors should look out below $65 as support, which could signal an upcoming downtrend may be near.
Featured image from Flickr, Chart from TradingView.com