Terra (LUNA2) has recovered dramatically nine days after hitting a historic low of $1.62. On June 27, the LUNA2 price reached $2.77 per token, representing a 70% rebound.
The recovery of LUNA2 followed similar retracement moves elsewhere in the crypto market, with top crypto assets Bitcoin (BTC) and Ether (ETH) rising by around 25% and 45%, respectively, during the same period.
Nonetheless, the token was trading 77.35% lower than its all-time high of $12.24 on May 30.
LUNA2 price forming ‘bear flag’
Given that it is a part of a larger corrective trend, the current buying in the LUNA2 market may trap bulls.
Specifically, LUNA2 appears to be developing a “bear flag” pattern, a bearish continuation setup, as the price moves upward within a parallel ascending channel following a significant move to the negative.
Bear Flags evaporate as the price crosses the bottom trendline of the channel. Technical analysis dictates that when they break down, the price returns to the level at a length equivalent to the extent of the last downside move (called “flagpole”).
LUNA2, which is currently trading close to the Bear Flag’s upper trendline (about $2.40), may soon experience a decline into the pattern’s bottom trendline, which is close to $2.
If supported by an increase in volume, a sustained price correction could send LUNA2 down below $1.30, a drop of about 50% from the price on June 2.
Persistent risks
LUNA’s dismal technical forecast is partly influenced by its contentious past.
Meanwhile, the nearly worthless old version of LUNA2, known as LUNA, began trading as an independent token under the rebranded “Terra Classic (LUNAC).”
Despite the fact that LUNAC is theoretically dead, its market valuation has increased by 75% to $594 million on June 27, from $339 million on June 12. Similarly, USTC’s market capitalization has increased from $13 million to $96 million during the same time period.