The incredible LUNA rally took place amid a flurry of positive and negative events while technicals suggest a correction is coming.
Terra has become a controversial blockchain project after the collapse of its native token LUNA and stablecoin TerraUSD (UST) in May. But its recent gains are hard to ignore for cryptocurrency traders.
LUNA rising from the dead?
After crashing to nearly zero in May, LUNA is now trading for around $6, a whopping 17,559,000% price rally in less than four months when measured from its lowest level.
Meanwhile, LUNA's performance in September is particularly interesting, given it has rallied by more than 300% month-to-date after a long period of sideways consolidation.
Terra ecosystem in September
It is vital to note that LUNA also trades with the ticker LUNA2 across multiple exchanges.
In detail, Terraform Labs, the firm behind the Terra project, divided the old chain into Terra Classic (LUNC) and Terra LUNA 2.0 (LUNA/LUNA2).
Terra Classic is the original version of the Terra blockchain, while Terra LUNA 2.0 was created as a part of a regeneration strategy by Terraform Labs founder Do Kwon. In doing so, Kwon and his team periodically airdrop the LUNA2 tokens to users affected by Terra's collapse.
LUNA/LUNA2 started pumping on Sep. 9, the day on which many things happened inside the Terra ecosystem.
First, Terra Classic (LUNC) passed governance proposals to add a 1.2% tax on all its on-chain transactions on the day. In other words, the proposals will permanently remove 1.2% of the LUNC supply from each on-chain transaction, as Cointelegraph covered here.
Terra Luna Classic (#LUNC) skyrockets >37,000% since its bottom after the Terra collapse— Hailey LUNC ✳️ (@TheMoonHailey) September 7, 2022
This comes after a proposal to implement a 1.2% token burn tax on all transactions that will enable $LUNC to become a deflationary cryptocurrency.#LUNC ✨ #HaileyLUNC ✨ $LUNC ✨ pic.twitter.com/oIxI7tqVkW
Second, a self-proclaimed Terra whistleblower, FatMan, reported a suspicious transaction worth 435,000 LUNA2 tokens to Binance, alleging that the sender is TerraForm Labs.
“Was eating lunch [and] saw LUNA2 pump. Checked the TFL Dawn wallet. Sure enough, after months of farming rewards with the airdrop they claim they never received, they sent all 435K available LUNA 2 to Binance just days ago. That’s just one address."
.@clayop tallied up the numbers - TFL sent a total of $3.9 billion USD (in UST) to exchanges including Binance and KuCoin.— FatMan (@FatManTerra) September 9, 2022
Let the enormity of that figure sink in, and consider how many people's savings that is added up. Crypto's biggest fraud.
No explanation from @stablekwon https://t.co/qc2kCFPMHW
However, Do Kwon dismissed the allegations.
The Sep. 9 pump also occurred a week after Terra passed the proposal to conduct its second airdrop of over 19 million LUNA tokens until Oct. 4.
LUNA price technicals lean bearish
From a technical perspective, LUNA's price risks undergoing a massive correction in the coming days.
Firstly, on the four-hour chart, the token's relative strength index (RSI) has jumped above 70, which is considered overbought territory where a correction becomes more likely. Secondly, the price has been forming a rising wedge, a bearish reversal pattern, since Sep. 9.
Notably, a rising wedge forms when the price trends higher inside an ascending range whose upper and lower trendlines converge toward one another. It resolves after the price breaks below the lower trendline together with a rise in trading volume.
As of Sep. 11, LUNA was testing its wedge's lower trendline for a potential breakdown move. In this case, the price will risk falling by as much as the wedge's maximum height.
In other words, LUNA could drop to $4.5, down 30% from today's price.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.