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LUNA - Understanding the Lunatic Drop 👇🧵Trying to find the explanation of what went SO wrong with Luna i found the best possible explanation here : $UST fell to a low of $0.66 while $LUNA crashed to a low of $24.85 overnight. Lessons learned from $LUNA $UST disastrous collapse 👇🧵 But let's assess what actually happened. - $UST deposits on Anchor fell 43% in a day (currently $6.7bn) - $UST getting massively shorted + sell-off on Curve - LFG emptied out all its reserves to save the peg - Rumours that Citadel engineered the attack / Lesson 1: Death Spiral Illustrated perfectly by @ZeMariaMacedo , the design of $LUNA $UST is a giant positive feedback loop. This was the "flywheel effect" that everyone's talking about but very few actually viewed it as a double edged sword. A design that has a tendency to spiral out of control, even if it is to the upside, is a fundamental flaw. Most positive feedback loops are bad, be it in biology or engineering. Don't get caught up in the buzzwords like "flywheel effect" esp when things seem rosy. Lesson 2: Arbitrageurs can stop arb-ing $UST peg is maintained by: - Arbitrage - @stablekwon & LFG's deep pockets If $UST falls below $1 (e.g. $0.95), arbitrageurs buy $UST for $0.95, redeem the $UST and mint $1 worth of $LUNA. Profit = $0.05, $UST supply falls, $UST --> $1 But if $LUNA is in a prolonged downturn, the risk of holding onto $LUNA after minting is high. The arb profit might get wiped after minting $LUNA as $LUNA price keeps dropping, hence arbitrageurs might abstain and choose to chill instead --> stabilization mechanism fails Lesson 3: Over-reliance on Do Kwon & LFG Crypto is built on the ethos of being independent of trusted third parties. If $UST relies on the aggressive, interventionist measures of centralized entities like Do Kwon & LFG, how is it scalable? Imagine maintaining a peg by having the founder pump in capital each time shit goes south? Everything about Terra operates off the back of exogenous capital injection. Even Anchor's 20% APY relies heavily on the yield reserve top ups instead of revenue earned from lending. The idea that Terra is too big to fail is very dangerous and it's why many diehard $LUNA maxis got burned today. It's a house of card built entirely on trust, in a supposedly trustless space. Lesson 4: Cult Heroes Cult heroes in crypto have the same ending. Daniele Sesta and Frog Nation. Andre Cronje and $FTM community. Do Kwon is next... He is a great guy don't get me wrong, but never all-in your trust in a cult hero and invest on people Lesson 5: Stablecoin Designs Seems like pure-play algo stablecoins can't withstand the heat. Over-collateralized stablecoins are icky cuz they're like loans instead of currency and have a massive capital utilization problem. A hybrid model might be it... @fraxfinance Lesson 6: LFG Reserves Transparency LFG is transparent about the size of its reserves and you can track their wallets in real time. Central banks usually avoid disclosing the size of their forex reserves e.g. Singapore or they release lagged data Conclusion: A lot of trust has been lost today. It really goes to show the importance of a sound, self-sustaining system beneath the veneer of marketing gimmicks. Can $UST and $LUNA rise again? Definitely. But A LOT of work is needed to fix the fundamental design flaws.
Editors' picks
by FX_Professor
66
LUNA/USD Daily TA Cautiously BearishLUNA/USD Daily cautiously bearish. *BTC is currently on the verge of testing the uptrend line from April 2017 on the daily (and from March 2020 on the weekly) at $30k major support*. Recommended ratio: 25% LUNA, 75% cash. Price is currently testing $34.86 support after dropping through 4 different support levels, this violent of a drawdown usually is followed by a fairly robust bounce. Volume continues to be moderate and growing for the third consecutive session; it's currently on track to favor sellers for four consecutive sessions. Parabolic SAR flips bullish at $88.77, this margin is very bullish. RSI is currently trending down at 20 and is oversold for the first time since May 2021; it is also currently breaking down below the 26.17 support + the uptrend line from November 2019 (26). Stochastic remains bearish and is currently testing max bottom. MACD remains bearish and is currently breaking down below the ATL (-7.75), forming a new ATL at -8.21. ADX is trending up (vertically) at 20 as Price continues to fall, this is bearish. If Price is able to establish support and bounce here at $34.86, then it will likely retest $45.78 and potentially higher. However, if Price continues its free fall then it will likely test $23.59 support (which would coincide with the descending trendline from December 2021) and potentially lower to retest the uptrend line from January 2021 at ~$20. Mental Stop Loss: (two consecutive closes above) $45.78 support-turned-resistance.
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by dailytaguy
4
LUNA/USD Daily TA Cautiously BearishLUNA/USD Daily cautiously bearish. Recommended ratio: 20% LUNA, 80% cash. Price is currently testing the uptrend line from July 2021 as support at $65 after briefly touching the uptrend line from January 2021 at $60. Volume is moderate for the first time since December 2021 as recessionary fears are putting selling pressure on almost all assets and equities. Parabolic SAR flips bullish at $93.60, this margin is bullish. RSI is currently trending down at 32 and is beginning to form a trough as it approaches 26.17 support. Stochastic remains bearish and is currently trending down at 2 as it approaches max bottom (where it can coast for a while). MACD remains bearish and is trending down at -5.15 with no signs of trough formation; the next support is the ATL at -7.75. ADX is currently trending up at 19 as Price continues to fall, this is bearish. If Price is able to defend support at the uptrend line from July 2021 at $65, the next likely target is a test of $70.15 resistance before potentially going higher (200 MA at $72). However, if it breaks down below this uptrend line, it will have the uptrend line from January 2021 at $60 as the next area of support before potentially retesting $54.50 major resistance. Mental Stop Loss: (two consecutive closes above) $71.93 (200 MA).
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by dailytaguy
LUNA/USD Daily TA Cautiously BearishLUNA/USD Daily cautiously bearish. Double Bottom invalidated, retest of 200 MA + uptrend line from July 2021 currently underway. Recommended ratio: 20% LUNA, 80% cash. Price is currently testing the 200 MA + $70.16 support + the uptrend line from July 2021 ($67) as support as the crypto market as a whole is seeing a weekend sell off. Volume remains very low and is on track to favor sellers for three consecutive sessions a slight uptick in activity seen in today's session. Parabolic SAR flips bullish at $93.95, this is mildly bullish. RSI is currently trending down at 33.25 after breaking below the descending trendline (support) from August 2021 at 38. Stochastic remains bearish and is currently breaking down below 21.78 support with no signs of trough formation. MACD officially broke below -2.43 after one week of testing it as support, it is currently trending down at -4 with no signs of trough formation. ADX is currently trending up at 16 as Price continues to fall, this is mildly bearish. If Price is able to defend support here at the uptrend line from July 2021 ($67), then it will likely test the 200 MA at $70.15 resistance before deciding its next move. However, if Price continues to fall below this uptrend line then it will likely retest the uptrend line from January 2021 at $60 as support. Mental Stop Loss: (two consecutive closes above) $71.52 (200 MA).
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by dailytaguy
LUNA/USD Daily TA Cautiously BearishLUNA/USD Daily cautiously bearish. Double Bottom on the verge of invalidation. Recommended ratio: 30% LUNA, 70% cash. Price is currently retesting $78.04 minor support as it fast approaches an invalidation of a potential Double Bottom formation. Volume remains very low and is on track to favor sellers for a second consecutive session if it is able to close today in the red. Parabolic SAR flips bullish at $94.37, this margin is neutral at the moment. RSI is currently trending down at 41.46 as it approaches a retest of the descending trendline from August 2021 as support at 38. Stochastic crossed over bearish in today's session and is currently trending down at 36.5 (just below 43.42 resistance), the next support is at 21.78. MACD remains bearish and is currently breaking down below -2.43 at -2.76; it is still technically testing -2.43 as minor support but if it loses it then the next support isn't until the ATL at -7.76. ADX is currently trending up slightly at 16 as Price is facing selling pressure, this is bearish. If Price is able to defend support at $78.04 minor support, then it will likely range between there and $84.05 resistance until it makes its next move. However, if Price breaks down below $78.04 minor support then it will likely retest the 200 MA at $70.15 support (which would coincide with the uptrend line from July 2021). Mental Stop Loss: (two consecutive closes above) $84.05 resistance.
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by dailytaguy
LUNA/USD Daily TA Neutral BearishLUNA/USD Daily neutral with a bearish bias. Double Bottom watch. Recommended ratio: 40% LUNA, 60% cash. Price is currently trending down at $81.25 and still testing $84.05 resistance as support after closing above it in yesterday's session; if it can close above $84.05 in today's session it would become support and if it closes below it would stay resistance. Volume remains very low and fairly balanced between buyers and sellers, it's currently on track to favor sellers in today's session. Parabolic SAR flips bullish at $94.75, this margin is mildly bullish. RSI is currently trending down at 43.52; the next support is the descending trendline from August 2021 at 39 and the next resistance is at 51.40. Stochastic remains bullish and is on the verge of crossing over bearish at 37.53, just below 43.42 resistance. MACD remains bearish and is currently trending sideways at -2.54 testing -2.43 minor support. ADX is currently trending sideways at 15 as Price is testing $84.05 resistance as support. If Price is able to close above $84.05 resistance in today's session it would turn to support, then a retest of $92.78 becomes the next likely scenario. However, if Price closes below $84.05 resistance then it will likely retest $78.04 minor support. Mental Stop Loss: (one more close above) $84.05 resistance.
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by dailytaguy
LUNA/USD Daily Neutral BearishLUNA/USD Daily neutral with a bearish bias. Equity and crypto markets rallying on FOMC announcement of 50 bps funds rate hike and June 1st start of balance sheet reduction. Double Bottom watch. Recommended ratio: 45% LUNA, 55% cash. Price is currently breaking out above $84.05 resistance at $87 and will look to close above it in today and tomorrow's session to establish a short term Double Bottom. Volume remains very low and favored sellers in yesterday's session (leading up to the FOMC announcement) but is now favoring buyers after the announcement. Parabolic SAR flips bullish at $95.66. RSI is currently trending up at 49.62 as it fast approaches a retest of 51.40 resistance. Stochastic remains bullish and is currently testing 43.42 resistance. MACD remains bearish and is forming a trough at -2.43 as it attempts to form a bullish crossover (at -1.97). ADX is currently trending down at 14.7 as Price is surging upward, this is mildly bearish at the moment but can change to bullish if it can bounce soon. If Price is able to turn $84.05 resistance to support, then the next likely target is a retest of $92.78 minor resistance. However, if Price falls back below $84.05, then it will likely retest $78.04 minor support before potentially heading lower. Mental Stop Loss: (two consecutive closes above) $84.05.
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by dailytaguy
LUNA/USD Weekly TA Neutral BearishLUNA/USD Weekly neutral with a bearish bias. Recommended ratio: 40% LUNA, 60% cash. Price is currently testing the uptrend line from August 2021 (this time at $82.50) for the fourth consecutive week. Volume remains very low and is fairly balanced between buyers and sellers, indicating that this is a consolidation before a pending breakout or breakdown. Parabolic SAR flips bearish just below $57.15 minor support. RSI is currently trending sideways at 54.63 just below the uptrend line from September 2020 (enough for it to still be testing it as support). Stochastic is currently on the verge of a bullish crossover at 32.46 support; if it can do this it will have another opportunity to test the descending trendline from September 2021 at ~50. MACD remains bearish and is currently trending down at 10.55, the next support (minor) is at 6.89. ADX is trending up slightly at 40 as Price tests a critical support on an uptrend, this is mildly bullish at the moment. If Price is able to defend support at the uptrend line from August 2021 ($82.50), then the next likely target is a retest of $87.51 minor resistance before potentially retesting $100. However, if Price breaks down here, it will likely retest $75.86 minor support before potentially retesting the lower trendline of the ascending channel from July 2021 at $65-$70. Mental Stop Loss: (two consecutive closes above) $87.51.
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by dailytaguy
LUNA/USD Daily TA Neutral BearishLUNA/USD Daily neutral with a bearish bias. Recommended ratio: 30% LUNA, 70% cash. Double Bottom watch. Price is currently facing rejection at $84.05 resistance after failing to close above it in yesterday's session. Volume remains low and is on track to spoil a three-consecutive-day streak of buyer dominance if it closes today's session in the red. Parabolic SAR flips bullish at $96.66, this is neutral at the moment. RSI is currently trending down at 42.34, the next support is a retest of the descending trendline form August 2021 at ~38. Stochastic is currently crossing over bullish at 30.65, just above 21.78 support. MACD remains bearish and is currently breaking down below -2.43 minor support at -2.70 with no signs of trough formation. ADX is trending down slightly at 15.86 as Price has encountered a critical resistance, this is neutral at the moment. If Price is able to breakout and close above $84.05 resistance two consecutive sessions, then the next likely target is a retest of $92.78 minor resistance. However, if Price is rejected here, then it will likely retest $78.04 and may potentially go lower depending on overall market conditions. Mental Stop Loss: (two consecutive closes above) $84.05.
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by dailytaguy
Trend Reversal in US 30 Years Bonds? Investment Opportunity?A longer term look at the US 30 Year Bonds reveals that the yields have broken to the upside of 2 standard deviation of the linear regression channel. In a way bonds have already executed the FED rate hikes. You can get around 3% yield on a US 30 year bond. Question is if the bond market will track lower increasing yield rates even further. Depending on your investment strategy this may be worth considering. I am still puzzled why not more money is not pouring into USD stablecoins as one get get e.g. 15% yield with UST on Nexo. That appears to be a no brainer, still there is some risk associated with the platform, but not too much more then with a bank. In any case US bonds are attractive assuming the FED will eventually be forced to pause rate hikes. Then a 3% yield with a potentially rising bond is a sweet deal. -------------------------------------------------------------------------------------------------------- ** Please support this idea with your likes and comments, it is the best way to keep it relevant and support me. ** -------------------------------------------------------------------------------------------------------- !! Donations via TradingView coins also help me a great deal at posting more free trading content and signals here !!
TVC:US30YLong
by CarpeMomentum
3
LUNA/USD Daily TA Neutral BearishLUNA/USD Daily neutral with a bearish bias. Recommended ratio: 40% LUNA, 60% cash. Double Bottom watch. Price is currently breaking out above $84.05 resistance as it aims to close above it in today's session. Volume remains very low and is on track to favor buyers for two consecutive sessions now, which strengthens the case for a Double Bottom recovery. Parabolic SAR flips bullish at $97.54, this margin is still mildly bullish. RSI is trending up at 45.30 after bouncing sharply off of the descending trendline from August 2021 at ~40; the next resistance is at 51.40. Stochastic remains bearish and is currently forming a trough at 27.51, a bullish crossover here would prevent it from testing 21.78 support. MACD remains bearish and is currently forming a trough at -2.43 minor support. ADX is trending up slightly at 15.86 as Price is attempting to play out a Double Bottom formation, this is neutral at the moment. If Price is able to close above $84.05 resistance in today's session and then again in tomorrow's session, the next likely target is a retest of $92.78 minor resistance (which should coincide with the 50 MA). However, if Price is rejected by $84.05 resistance, then it will likely retest $78.04 and potentially fall lower. Mental Stop Loss: (two consecutive closes above) $84.05.
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by dailytaguy
LUNA/USD Daily TA Cautiously BearishLUNA/USD Daily cautiously bearish. Recommended ratio: 20% LUNA, 80% cash. **Sunday bull-trap watch (bearish) / Double Bottom watch (bullish) **. Price is currently testing $78.04 minor support and could potentially be forming a short term Double Bottom if it can follow through with today's bounce. Volume remains very low and is on track to break the two day streak of seller dominance if it can close today in the green. Parabolic SAR flips bullish at $98.40, the margin of this gap is mildly bullish at the moment. RSI is currently trending up at 42.88 after bouncing off of the descending trendline from August 2021 at ~40; if it can establish support here, the next resistance would be at 51.40. Stochastic remains bearish and is currently trending down at 26.70 as it fast approaches 21.78 support. MACD remains bearish and is currently beginning to form a trough at -2.43 minor support; if it can hold support here, this would be mildly bullish. ADX is trending up at 17 as Price is testing $78.04 minor support, this is mildly bearish. If Price is able to defend support (minor) at $78.04, then a short term Double Bottom will probably be in play and Price will likely test $84.05 resistance. However, if it continues to fall here, a classic Sunday bull-trap would probably be confirmed and it will likely test the 200 MA at $70.15 support. Mental Stop Loss: (two consecutive closes above) $84.05.
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by dailytaguy
LUNA/USD Daily TA Cautiously BearishLUNA/USD Daily cautiously bearish. Recommended ratio: 15% LUNA, 85% cash. Price is currently breaking down below $84.05 support (at $79.75) and is approaching a retest of $78.04 minor support. Volume remains very low and is on track to favor sellers for a second consecutive session if it closes today in the red. Parabolic SAR flips bullish at $99.32. RSI is currently trending down and testing the descending trendline from August 2021 at ~40, this is a critical support test. Stochastic remains bearish and is currently testing 43.42 support. MACD remains bearish and is currently trending down at -1.97 as it fast approaches a retest of -2.43 minor support. ADX is in fact forming a trough and is currently trending up at 16 as Price continues to fall, this is bearish. If Price is able to establish support at $78.04 minor support, then it will likely test $84.05 as resistance. However, if Price breaks down below $78.04 minor support (which is very plausible at the moment), then it will likely retest $70.15 support (which would coincide with the uptrend line from July 2021). Mental Stop Loss: (two consecutive closes above) $84.05.
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by dailytaguy
LUNA/USD Daily TA Cautiously BearishLUNA/USD Daily cautiously bearish. Recommended ratio: 25% LUNA, 75% cash. Price is currently testing $84.05 support. Volume ended up closing yesterday's session out in the green and remains very low as it looks on track to end the two day streak of buyer dominance with a close in the red. Parabolic SAR flipped bearish at $84.05 support and now must reach $99.60 to flip back to bullish. RSI is currently trending down at 44.91 and the next support is at the descending trendline from August 2021 at around 40. Stochastic remains bearish and is trending down at 57.32 and the next support is at 43.42. MACD crossed over bearish in today's session and is currently trending down at -1.42, the next support is at -2.43. ADX is currently beginning to show signs of trough formation at 15.86 but is still trending down as Price depreciates, this is mildly bearish at the moment. If Price is able to defend support at $84.05, then it will likely consolidate between that level and $92.78 minor resistance. However, if Price breaks down below $84.05 support, then it will likely retest $78.04 minor support before potentially heading lower. Mental Stop Loss: (two consecutive closes above) $92.78.
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by dailytaguy
LUNA/USD Daily TA Cautiously BearishLUNA/USD Daily cautiously bearish. Recommended ratio: 30% LUNA, 70% cash. Price is currently printing a Gravestone Doji candle (bearish) at $89 as bulls were swiftly rejected at $92.78 minor resistance. Volume remains very low and is on track to favor sellers in today's session, which is bearish considering how close the MACD is to a bearish crossover and how Price has been hovering between support and resistance for five consecutive sessions now. Parabolic SAR flips bearish at $84.05 support, this remains bearish. RSI remains trending sideways at 47 and is beginning to slightly trend down, the next support is at the descending trendline from August 2021 at ~40. Stochastic remains bearish and is currently trending down at 61 after breaking down below 69.86 support; the next support is at 43.42. MACD remains bullish (correction from yesterday's TA where I incorrectly labeled it bearish) and is on the verge of a bearish crossover as it continues to hover at -1.06; a continued fall in Price in the next session will likely cause aforementioned bearish crossover and the next support is at -2.43. ADX remains stalled yet trending down at 17 as it appears to be nearing an inflection point where it will likely form a trough; if this happens and Price continues to fall, this would be bearish. If Price is able to surge here and reclaim $92.78 minor resistance, the bearish thesis would be invalidated and the next likely target would be a retest of $102.60 minor resistance. However, if Price breaks down here then it will likely retest $84.05 support (and potentially lower). Mental Stop Loss: (two consecutive closes above) $92.78.
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by dailytaguy