The price of Lido DAO (LDO) dropped closely a day after its key momentum oscillator crossed into “overbought” territory.
LDO undergoes overbought correction
LDO’s price plunged to as low as $1.04 on July 16 from $1.32 on July 15, amounting to a 20%-plus decline. The token’s sharp draw back transfer took its cues from a number of bearish technical indicators, together with its every day relative power index (RSI) and its 100-day exponential shifting common (EMA).
LDO’s newest plunge got here after it rallied over 150% in simply two weeks, a transfer that concurrently pushed its every day RSI above 70 on July 15, thus turning it overbought.
An overbought RSI alerts that the rally could also be nearing an finish whereas readying for a short-term pullback.
Meanwhile, extra draw back cues for the Lido DAO token got here from its 100-day EMA (the black wave in the chart above) close to $1.30, which capped LDO from extending its 150% price rally.
LDO/USD every day price chart. Source: TradingView
In its preliminary phases, the price motion appeared much like LDO’s correction in April 2022, after its RSI crossed above 70 for the primary time in historical past. Notably, the Lido DAO token had undergone a 90%-plus price decline to achieve $0.39, its report low, by mid-June 2022.
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That raises LDO’s potential to repeat the April-June 2022 correction, albeit with no precise backside in sight. That mentioned, the token’s interim draw back goal seems close to its 50-day EMA (the crimson wave) at $0.90, down one other 20% from right now’s price.
On the opposite hand, a break beneath the 50-day EMA would danger crashing LDO to round $0.75, which coincides with the 0.618 Fib line of the Fibonacci retracement graph drawn from $0.39-swing low to $1.31-swing excessive.
Ethereum 2.0 anticipated in September
On July 15, Ethereum builders confirmed that their community’s much-awaited transition to proof-of-stake from proof-of-work, dubbed “the Merge” or “Ethereum 2.0,” would tentatively happen on September 19.
LDO surged practically 25% on the day of the announcement as a consequence of its shut ties to Ethereum.
In explicit, LDO serves as a governance token at Lido, a liquid staking platform that has locked over 4.13 million ETH (price round $5 billion) into Merge’s official good contract on behalf of its customers.
Ethereum 2.0 complete worth staked by supplier. Source: Glassnode
Post Ethereum’s announcement, the variety of Ether deposited into the Merge good contracts by way of Lido elevated.
With Lido presently the most important supplier by complete worth staked, a profitable Merge launch may carry extra customers to Lido, which, in flip, may enhance demand for LDO tokens.
Therefore, a technical correction in LDO’s price may comply with up with a rebound towards the 100-day EMA if the Ethereum’s plans to turn out to be a proof-of-stake chain comes punctually.
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