Terra’s LUNA continues its sharp downslide into Monday, taking its weekly loss close to 30% on the back of the controversy surrounding Wonderland after being connected to it via the MIM stablecoin. At the time of writing, LUNA/USD is trading at around $45.16.

The issue exploded last Thursday after a popular crypto analyst unearthed the identity of DeFi project Wonderland’s treasury manager as Michael Patryn, the co-founder of now defunct Canadian crypto exchange QuadrigaCX. Patryn was among the team of QuadrigaCX that allegedly defrauded investors to the tune of nearly $200 million.

Why Does Wonderland Impact The Value of Terra’s LUNA?

The news affects the Terra ecosystem and its native token LUNA as the TerraUST (UST) stablecoin can be staked to lend out MIM – a stablecoin minted by Abracadabra’s lending platform and connected closely to Wonderland. As the development unfolded, the funding of both stablecoins fell by nearly one-third almost immediately. As of this moment, the UST still remains under the $1 mark against the US dollar, although it has closed the gap while the MIM remains weaker.

The DeFi TVL of Terra has fallen by nearly 25% over the past week on account of this development, although it still retains the number two position in the charts under Ethereum. The MIM, like the UST, is an algorithmically backed stablecoin a crash in liquidity from DeFi protocols on the Terra blockchain can impact the soft peg maintained by the developers for the UST against the US dollar.

However, even before the Wonderland controversy erupted late last week, Terra’s LUNA had come under pressure after the flagship saving protocol on the blockchain Anchor noted a decline in its reserves. Borrowing demand on the protocol has fallen, causing Anchor to tap into its UST reserves to make payments. The total deposits in the DeFi project exceed $5 billion, rising sharply since November but borrowings have remained mostly flat at around $1.22 billion.

LUNA/USD Technical Analysis

According to a leading crypto analyst who operates under the pseudonym Pentoshi, technical indicators point to a possible bounce in LUNA’s value before the next bearish round. Although, he does forecast that altcoins could see a sharp drop in their values in the coming months as investors move away from speculative trading and in search of higher value from their investments.

On the 4-hour chart of LUNA/USD, moving averages and the MACD are flashing strong sell signals. However, other popular technical indicators like the Stochastics RSI and momentum reveal some interest among buyers.

Terra’s LUNA is trading under the pivot point at $53.93 but manages to hold above the immediate support at $37.94. Let’s see if more sellers jump in the game as this could cause the crypto to test its support level.