Warning For Terra ! Major Correction Might Take LUNA Price Down To $51 !

The post Warning For Terra ! Major Correction Might Take LUNA Price Down To $51 ! appeared first on Coinpedia - Fintech & Cryptocurreny News Media| Crypto Guide

The crypto movement has seen no strong bullish movement even as the tokens try to propel. Bitcoin unable to break $40000 is hovering around $38K. ETH too is down by 0.9% trading at $2,567.39. All other tokens follow the same cue as they try to recover. 

One of Ethereum’s most volatile competitors is expected to undergo a significant corrective move, according to a widely watched crypto trader. Light, a fictitious trader, tells his Twitter followers that he’s shorting Terra (LUNA) with a $51 price objective.

Because of its reliance on the Terra-based stablecoin TerraUSD, he believes the decentralized finance (DeFi) payment network will suffer. 

“Short LUNA/USDT from $98. Swing failure double top in an alt bear market and narrative is bankrupt – artificial Ponzi yield when no one wants to borrow stables.”

Terra is a blockchain network that allows users to burn its native asset LUNA to create stablecoins like TerraUSD (UST). Owners of UST can either convert their stablecoin to LUNA or deposit their assets with lending platform Anchor Protocol (ANC) and get a 19.5 percent annual percentage yield (APY).

The borrowing rate for UST is 13 percent, according to analytics firm IntoTheBlock, in order to maintain Anchor Protocol’s over 20% APY.

Because of the current adverse sentiment in the crypto markets, Light believes that investors will be hesitant to borrow UST, making Anchor Protocol’s 19.5 percent APY unsustainable in the long run. Investors may convert their UST to LUNA in this scenario with the purpose of selling the top Ethereum (ETH) competitor.

Terra does token donations

Do Kwon, the chief executive of Terraform Labs (TFL), has revealed that the Terra developer has donated 12 million LUNA tokens worth $1.2 billion to keep the economy of the seventh-largest crypto asset healthy.

“TFL has donated 12 million additional LUNA to Luna Foundation Guard (LFG)…

The funds will be burned to mint UST, and thereafter used to grow LFG’s reserves. At current prices, this reflects another 1.2 billion incoming addition to the UST reserves.”

When demand for borrowings is minimal, Terra uses its UST reserves to pay for its high APY.