Land (MOON) emerged as one of the best performing financial assets in February, a month mired in geopolitical conflict and its negative impacts on the crypto market.
LUNA disassociates itself from the crypto market
LUNA price increased by a little over 75% to reach $91.50 by the close of the month UTC. By comparison, the percentage return of other top tokens, primarily Bitcoin (BTC) and ether (ETH), in the same period turned out to be around 12.25% and 9%, respectively.
Interestingly, most of LUNA's earnings in February it appeared on the last day of the month. The Terra token jumped 26% on Feb. 28, in part due to similar bullish moves elsewhere in the crypto market. For example, BTC and ETH pink 14.50% and more than 11.50%, respectively, on the same day.
While still positive at 0.09, LUNA's correlation with Bitcoin has dropped of late after reaching 0.81 on Feb. 21, TradingView data shows. A correlation of 1 means that two assets are in sync, while 0 shows that their price moves independently.
Terra's LUNA/BTC pair also showed its rising valuation against the major cryptocurrency.
In detail, the LUNA/BTC pair jumped over 56% to 21,171 satoshis in February, suggesting that traders hedged the Terra token as Bitcoin's correlation with a bearish stock market grewreaching 0.70 earlier this year.
As to why the merchants seemed to have considered LUNA their temporary safe haven in the first place, the answer might lie in Terra's token economy.
29 million Terra tokens destroyed
Data obtained by the Smart Stake analysis platform He showed that the Terra protocol burned 29 million LUNA tokens worth $2.57 billion recently. That happened when the supply of TerraUSD (UST), a stablecoin backed not by the US dollar but by LUNA, increased from around 11.26 million on February 1 to almost 12.92 million on February 28, representing an increase of almost 14.75%.
A growing supply of UST is seen by traders as a bullish catalyst for LUNA, mainly due to the so-called UST-LUNA token model. In detail, Terra preserves the UST USD parity through an elastic monetary policy. So when the value of UST exceeds $1, Terra incentivizes its users to burn LUNA and mint UST.
But when the supply of UST contracts, LUNA's rating decreases due to a slowdown in the combustion mechanism. Still, LUNA's valuation tends to rise along with UST's offering.
On February 22, Luna Foundation Guard (LFG), a non-profit organization that supports the Terra blockchain ecosystem, Announced which had raised $1 billion in a LUNA token sale round led by Three Arrows Capital, a venture capital firm backed by Ethereum skeptic Su Zhu and Jump Crypto, a trade group known for helping Solana Cross Bridge Platform Wormhole to replace the 300 million dollars that were stolen.
1/ The long-awaited [REDACTED] 3 is here!
The Luna Foundation Guard (LFG) has closed a $1 billion private token sale to establish a decentralized system US$ Foreign exchange reserve denominated in $BTC!
โ Terra (UST) Powered by LUNA (@terra_money) February 22, 2022
LFG revealed that it would use the proceeds to build a โUST Currency Reserveโ, raising the prospects of increasing the stablecoinโs supply in another $1 billion worth of LUNA-backed tokens.
LUNA's price has increased almost over 90% since the LFG announcement. By contrast, the total market capitalization of all cryptocurrencies combined has increased by just 13% in the same period, underlining that crypto traders have flocked to the Terra market.
What awaits LUNA?
Terra's technical outlook appears skewed to the upside due to an ongoing "bull flag" breakout move.
The bull flags are bullish continuation patterns They appear when the price consolidates downwards within a descending channel after a strong upward movement. Eventually, it breaks out of the channel range to the upside, with a price target ideally of a length equal to the size of the up move that preceded the bull flag formation.
LUNA appears to have entered the final phase of its bull flag setup, as shown on the chart below. It is now eyeing a move towards $120, an all-time high for Terra if it is achieved.
On the other hand, LUNA volumes on the three-day chart look weak, showing that the ongoing bullish pullback remains less compelling for traders. His volume profile also shows little historical activity above $70.
Related: $300M in Crypto Liquidations Accompany Bitcoin's Rise to $44K
Additionally, the LUNA Daily Relative Strength Indicator (RSI) has been showing an "overbought" warning, signaling that there could be some price correction in the coming sessions.
However, in the long term, the path of least resistance for the Terra token remains to the upside, with its year-over-year return against the dollar exceeding 1,200% as of February 28, 2022.
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 do your own research when making a decision.
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