Terra (LUNA) has surged during the past week after a period of consolidation as the network has begun burning the supply of its native token. As of press time, LUNA trades at $51,16 with a 5% loss in the daily chart.
LUNA with signs of recovery in the 4-hour chart. Source: LUNAUSDT Tradingview
Related Reading | Why The Terra Ecosystem Delayed A Major Mainnet Upgrade For Late September
Yesterday, before Bitcoin and major cryptocurrencies dropped from new-all times highs, LUNA started a breakout to the upside and seem ready to breakthrough the resistance at $54.
However, the rally was spoiled by the flash crash and LUNA was rejected near the mid area around its current levels.
The rally seems drive by the implementation of 3 major upgrades on the Terra mainnet. As NewsBTC reported 3 weeks ago, the network was ready to introduce the Colombus-5 and Wormhole v2 with the Inter-Blockchain Communication (IBC) protocol upgrade.
The first of these 3 improvements COL-5 was set to implement a deflationary mechanism for LUNA. In addition, the upgrade was designed to increase Terra’s interoperable capabilities.
In the past year, tokens with a burning supply system have seen great appreciation. For example, Binance Coin (BNB) rose from the low $50 and reached an all-time high above $600.
Ethereum and its recently integrated EIP-1559 is another example. The network changed its fee model to burn a portion of ETH with each transaction.
LUNA could follow a similar path with $80 as a potential reasonable target for LUNA in the short term but could record further gains above $100 and join Solana (SOL) as one of the top performers in 2021.
Investor Daniel Cheung has been very bullish on Terra (LUNA) and its ecosystem due to its potential to disrupt the stablecoin sector. Upon launch of the burning mechanism, Cheung said:
Thesis for $LUNA is playing out; $140 price target in the short term still holds. Long term, Terra is one of the few protocols with the potential to be in the trillion-dollar market cap range given TAM for stable coins is infinite.
— Do Kwon (@stablekwon) November 10, 2021
Terra (LUNA) Started Its Moon Phase?
With Bitcoin moving sideways after the crash, the altcoin market could take the opportunity to diminish the BTC dominance. For LUNA this could translate into price discovery.
Related Reading | Why Terra (LUNA) Will Reward Users With New Community Bounty Program
To achieve this goal, LUNA must reclaim $54 and smash through the resistance at $56 with a potential short-term price target at $60. Cheung added the following on LUNA’s potential to enter the top 10 by market cap, the current phase of the bull run, and the asset’s fundamentals:
It is important to learn to zoom out on the charts. $LUNA & $SOL are amazing buying oppts here, bullish structure still very strong and story continues to get better here. The run is not over yet and both will go parabolic soon. Best assets always have bids.