Why you must be careful trading Terra’s LUNA 2.0 price

Terra (LUNA) price action is on the cusp of making a massive correction after the playing field changed on Thursday after the ECB massively dropped the ball. The repercussions of that central bank miscommunication have triggered a massive move in the dollar that will not only weigh on the LUNA/USD spot price, but will also turn on the screws for Terra to maintain its peg against the dollar. With several headlines on Thursday out of Congress with questions on a regulatory crackdown on stablecoins, the last days of this second version for LUNA look to be counting down.

LUNA price last trading days are counting down

Terra price could be in for a bit of pain as two significant external factors could cause a massive headwind, or rather even a massive hurricane, for that matter. On Thursday, the ECB dropped the ball by committing to the most minor rate hike in global markets, while other major central banks are committing to longer, more extensive and faster rate hikes to tame inflation. The most significant side effect of this mishap was that the euro tanked massively and, in turn, made the dollar more expensive across the board. 

LUNA price has not yet repriced its own intrinsic value against that stronger dollar, and then there is still the issue of its peg to the strong dollar, which will force the hand for Terra to buy more assets to support that peg, and which may prove difficult with stocks on the back foot losing value. As more headlines appear regarding regulatory crackdown, LUNA price looks set to cave in on the pressure and is set to fall back to $2.00, a 35% decline. If the dollar strengthens further and makes new lows, expect to see a further drop towards possibly just a few cents as investors turn their back on the stablecoin for good.

LUNA/USD 4H-chart

A jump to the upside, towards $3.80 or $4.00, on the other hand, could come about if, later this afternoon, the US inflation numbers are a surprise to the downside. That would mean that the FED is excellently taming inflation, and less severe action is needed. That would, in turn, trigger a jump in equities, creating a double supporting tailwind for LUNA price with both the risk-on from equities and the weaker dollar as driving forces. A rally all the way up to $6.00 could be possible, but then markets would need to pump price action up.