Loony ('mad, batty')

This is not the adjective of loon, meaning crazy or eccentric person, which itself comes from Middle Englidh loun, rouge. However, the sense of loon itself was influnced by loony, which infact is a shortened and altered from lunatic (deriving ultimately from latin luna, moon, from the once held belief that lunacy or madness depended on the phases of the moon).

Source: NTC's Dictionary of Word Origins, Adrian Room