As the cryptocurrency market moves to the upside, the price of LUNA will move on its own. Terra’s native cryptocurrency records a 6.4% profit in the last week, as BTC, ETH, and BNB, move sideways.
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LUNA currently trades at $89.35, with a 4.8% drop in price over the past 24 hours. Despite losses in recent weeks, the cryptocurrency continues to climb the list of top 10 cryptos according to market. At the moment, it is at 7th place after pushing down Cardano(ADA), Solana/SOL and Polkadott (DOT).
Murray Rudd, an economist, has published a report that demonstrates a possible decoupling of Bitcoin (BTC), and Terra (LUNA). It is the most dominant cryptocurrency in the world and has strong market dominance.
Therefore, it is common for altcoins to trend lower of higher, to move in tandem, with BTC’s price action. Recently, LUNA’s price has possible start to breakaway from this pattern, it sometimes tends to move on its own direction regardless of Bitcoin.
Rudd examined LUNA/BTC’s performance over different timeframes and used different metrics in support of this thesis. The economist represented this trading pair’s performance with different correlation zones.
The green and red areas represent high correlations, respectively. While the white to blue area indicates periods where LUNA has low or no correlation with BTC (or vice versa), the area in the middle represents high correlation periods. Rudd stated that this chart shows:
Since Aug 2021, the degree of positive correlation seems to have decreased in strength and duration (i.e. more time in weaker positive correlation zones than in strong correlation).
In addition, the economist discovered moments in which the metric moved more clearly by looking at the LUNA/BTC correlation over a 30-day span from January 2020 to Jan 2021.
The chart below, for example, shows that the correlation between the trading pair and BTC declined during Q4 2020 when BTC started its climb towards new heights. Conversely, the chart indicates LUNA tends to move on its own, at least for this period, after long period of BTC’s price consolidation.
How the Luna Decoupling will affect future price action
According to the economist, a spring 2021 period with uncorrelated prices was also predicted for the LUNA/BTC pair. In terms of capitalization, crypto markets reached their local maximum at $2 trillion.
Across 2021, Terra’s native asset will experience other uncorrelated or low correlation periods. When the crypto market started bouncing back from a long period of bearish price action, summer 2021, the LUNA/BTC trading pair “abruptly flipped from positive correlation to being uncorrelated”.
LUNA experiences similar events in September 2021 as well as December 2021. At the time, the ecosystem was still discussing major upgrades to its mainnet as well as the introduction of a burning mechanism that would allow LUNA to be used.
The Terra ecosystem has been updated and the new mechanism have been available for just a few minutes. As time goes by, they could contribute with LUNA’s full decoupling from Bitcoin and the crypto market. Rudd is currently unsure if this will happen but he said:
LUNA prices are not completely separated from BTC and likely won’t be. While this indicator is not able to forecast future movements in correlation, it has clearly shown a marked decoupling of Bitcoin and LUNA price since summer 2021.
Investors could find uncorrelated assets to be valuable as they can provide a hedge against the sector’s trends. Investors could use LUNA to protect their assets in a bear market or the stablecoin UST to do so.
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A further reason for strengthening the Terra ecosystem’s bull thesis could be the rising demand for this stablecoin decentralized and its effect on the price LUNA.