Can Luna Drop Lower?

Source Node: 1303192

The post Can Luna Drop Lower? by Reid McCrabb appeared first on Benzinga. Visit Benzinga to get more great content like this.

Think Luna will drop lower? You can short the token on FTX, or buy it on Gemini!

Terra (Luna), the cryptocurrency backing the UST stablecoin, has taken a massive hit in market capitalization over the past couple of days. The LUNA token is most recognized for backing a stablecoin pegged to the US dollar, TerraUSD (UST). 

While the entirety of the crypto market has taken a hit over the last couple of weeks, the LUNA price has seen one of the worst dips in price, losing over 90% of its value. While macro factors are playing a role, the instability of LUNA’s stablecoin UST has caused panic for both UST and LUNA holders.

With LUNA well off its highs some may see a buying opportunity. However, a bottom has yet to be found for the token, as the price continues to plunge. Downwards pressure on Bitcoin has most altcoins trading lower, further murking the waters for LUNA’s future. 

Can Luna Drop Lower Than $1?

It is quite possible that LUNA drops below $1. With the token trading around $75 at the beginning of May 2022, it’s already plummeted to less than $1 for brief moments. And with no bottom found, the flight out of LUNA could worsen. As of writing, LUNA is trading at a mere $2.20 per token.

There is also a possibility that the price sees a drastic reversal if the UST regains its peg to $1. However, because you can redeem 1 UST (currently around $0.85) for $1 worth of LUNA, arbitrage opportunities exist that could impact the price of LUNA.

Why Is Luna Going Down?

Luna’s decline in price was ignited by a number of reasons, most importantly was UST losing its peg to $1 and dropping to as low as $0.68. This occurred when UST dipped just slightly below its $1 peg, which is not uncommon for stablecoins but was becoming a clear problem for UST. The volatility of the broader markets exacerbated the situation, and soon, UST holders were cashing out of the coin altogether in exchange for other stablecoins. 

With Terra Luna failing to serve its purpose in stabilizing UST, the price per coin began to drop rapidly. Just over a month ago LUNA was trading at roughly $115 per coin. Following UST’s depeg to the dollar, the LUNA token now trades below $3 per coin.

How to Short Luna

window.LOAD_MODULE_PRODUCTS_TABLE = true;

get started
securely through ByBit’s website

Best For

API Trading

N/A
1 Minute Review

Founded in 2018, Bybit is a Singapore-based cryptocurrency exchange offering derivatives in 17 different trading pairs. Available to clients around the world, Bybit has over 2 million users trading traditional futures contracts and perpetual contracts with no expiration. Spot trading is available on the platform, which features a compatible mobile app for download on both iOS and Android devices. Bybit has reliable customer service, sophisticated trading tools, and a wealth of knowledge in its education libraries. However, US residents are shut out from its services.

Best For

  • Cryptocurrency traders of all levels
  • Affordable trading fees
  • API trading
  • Multiple order types
Pros

  • Fast server with no downtime
  • Accessible customer support
  • Can make deposits with more than 50 different currencies
  • Intuitive platform with mobile functionality
Cons

  • Not available to residents of the US, Quebec, Singapore, or China
  • Spot trading only available to whitelist clients

If you are looking to short LUNA, both FTX and ByBit offer short selling features. However, if your IP address shows you are in the United States this action is prohibited. Other ways to short the coin would be through a decentralized exchange such as Uniswap, which offers leveraged tokens that rise in value when a token falls.

Can Luna Still Hit $100 In 2022?

Just a couple of months prior to this drastic drop in UST price, Luna was recognized as one of the most trusted stablecoin projects. While this news is horrible for the short term, there is still hope for Luna to regain its prowess as a true stablecoin competitor.

First a UST repeg must happen, followed by improvements in the algorithm, and finally restored faith from the crypto community. None of which are guaranteed to happen, let alone happen in 2022. A pump in the broader markets would also be pivotal in helping Luna reach $200. While this perfect storm is unlikely, it is not out of question.

Where to Buy Luna Tokens

window.LOAD_MODULE_PRODUCTS_TABLE = true;

Invest In Crypto
securely through Gemini Crypto’s website

Best For

New Investors

N/A
1 Minute Review

Gemini is a cryptocurrency exchange and custodian that offers investors access to over 100 coins and tokens. Founded in the US, Gemini is expanding globally, in particular into Europe and Asia. Offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x.

Gemini is 1 of the only brokers with multiple platform options based on skill level. New investors will love the streamlined interface of Gemini’s mobile and web apps, while advanced investors might appreciate all the tools that come with ActiveTrader. 

In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review.

Best For

  • New investors looking for a simple mobile and web app
  • Day traders looking to use technical analysis tools
  • Users looking for a 1-stop-shop to buy, sell and store all of their cryptos
Pros

  • Easy and quick signups — can get started in as little as a 5 minutes
  • Multitude of platforms to accommodate traders of all skill levels
  • Hot wallets include insurance to protect your from theft and hacking attempts
Cons

  • Charges both a commission and a convenience fee for users buying and selling through the desktop or mobile app

The trading platform Gemini supports the buying and selling of LUNA, if you are looking to trade the asset. Continued instability could lead to further regulation of stablecoins as the US was already wary of them, making it more difficult to find supportive platforms for projects such as Terra Luna.

Will Luna Keep Crashing?

If UST fails to regain its peg to the dollar then it is very likely that Luna will continue crashing. Even if it does restore its stablecoin status, there is going to be a lot of faith lost in the stablecoin, thus, lost faith in LUNA. 

The purpose of a stablecoin is defeated if it is capable of crashing well below its allotted value. With competition among stablecoins hot, money is likely to pour into competitors DAI, USDC and Tether. For LUNA to regain its price, there must be a return in consumer confidence in the UST stablecoin.

Is Now A Good Time To Buy Luna?

Luna is trading at a large discount relative to its price just a month prior. However, this price drop is warranted by its inability to stabilize the UST. With UST losing its peg to the dollar, there is no purpose for its existence. With that being said, it’s still possible that UST is able to regain its peg to the dollar. If this happens, there is still a long road ahead of learning and improving upon the protocol, as it is clearly insufficient. It will be up to the markets to decide if UST and LUNA can be trusted again.

The post Can Luna Drop Lower? by Reid McCrabb appeared first on Benzinga. Visit Benzinga to get more great content like this.

Time Stamp:

More from Benzinga