Terra’s LUNA is on a sharp downtrend, losing almost 15% of its value over the past 24 hours amid the ongoing rout in the cryptocurrency market, and there could be more downside coming as long as market leader Bitcoin’s price remains weak in the short term. At the time of writing, LUNA/USD is trading around $27.07.

The bearish sentiment in the crypto market has been triggered by a risk-off mood in global financial markets as investors worry about the potential implication of China’s Evergrande Group defaulting on its mountain of debt. Even as financial analysts sought to play down a possible ‘Lehman Brothers’ moment of China’s leading property developer, investors worry that its collapse could have severe ramifications on global financial markets as well. This concern is keeping several investors wary about riskier instruments, including cryptocurrencies at the moment, driving down the price of Bitcoin and other digital assets.

Terra’s LUNA is feeling additional downward pressure on account of higher levels of regulatory scrutiny on cryptocurrencies in general and on stablecoins especially. SEC Chairman Gary Gensler has cautioned that stablecoins like LUNA are trading as securities and will come under the agency’s regulatory scanner, potentially keeping investors away from it as a result of the heightened uncertainty. Gensler has, on several occasions in the past, criticized cryptocurrencies, despite their rising popularity among both retail and institutional investors, and if the SEC goes after stablecoins, it could spell trouble for coins like LUNA.

In addition, the SEC has also been targeting the DeFi sector in recent weeks, further denting the optimistic outlook that Terra offered. One of the key drivers behind the blockchain’s growth was the soaring popularity of DeFi protocols and analysts remained bullish that the continued increase in DeFi projects could increase the demand for Terra’s ecosystem. However, the regulatory challenges that the DeFi sector is currently facing in the US could also slow down its growth and weaken the demand for Terra’s LUNA, at least in the short term.

Key Levels to Watch

On the H4 price chart of LUNA/USD, we find a strong bearish bias among moving averages as well as leading technical indicators MACD and momentum. The price is sitting well under the pivot point at $34.92 and has broken under the support levels at $30.07 and $27.21 as well.

An increase in selling pressure can see the price towards the last support at $19.51. If this level fails to hold, we could see the price of Terra’s LUNA crash unless the sentiment turns around and buyers jump back into the market soon.