How a sell-off in US commodities provides headwinds for Terra’s LUNA 2.0 price

• Terra price takes a beating as commodities sell-off with oil touching down on $100, Iron ore tanking 10% in two days.
• LUNA price sees investors pulling further cash out of cryptocurrencies.
• Although dollar strength remains balanced, the new round of risk-off is hurting LUNA yet again.

Terra (LUNA) price is coming under scrutiny as the last asset class set to fall from recession fears and inflation persistence rolls over. After the stock markets entered a bear cycle and bonds already took a beating, the last castle standing is the commodity super cycle. As prices have risen higher, demand has been fading, resulting in an oversupply in certain commodities, making the elevated prices unjustified and triggering a sell-off in the asset class, which is spilling over to a flight into cash, with cryptocurrencies seeing another exodus of investors.

LUNA price set to tank 35%

Terra price sees bears drilling on $1.937 after LUNA price was able to pop back above the level following the completion of its bearish triangle from last week. After almost every asset class had its correction, the last one left standing was commodities, which were rallying in their super cycle. Now sentiment is turning, however, as elevated prices have become unsustainable for specific production processes and have thus started to see demand fading while stockpiles rise. 

LUNA price is undergoing another exodus of cash, linked to the correction in commodities, with copper, WTI crude oil and iron ore all selling off multiple percentage points as demand starts to fade, but inflation remains elevated. The commodity sell-off is another indication  a recession could be around the corner. With that flight into cash, a liquidity drought is at hand in Terra price, which could see a break below the 50% Fibonacci level at $1.7662 and a drop to $1.3494 follow, near the 61.8% Fibonacci level, losing 35% in total.

LUNA/USD daily chart

The upside potential for LUNA price comes from risks to the dollar as most commodities are quoted in dollar prices. The intrinsic value of the dollar is at risk should there be a recession. The US is the world’s largest economy but it is still, nevertheless, vulnerable due to its high debt and large number of households holding credit card debt, which becomes heavier in a recession with higher rates and repayments due. So luckily, the absent dollar strength is not triggering a falling knife, and could see a possible pop back towards $2.6987, which is the 23.6% Fibonacci level.