Lido DAO (LDO) price fell heavily a day after its key momentum oscillator crossed into “overbought” territory.
The LDO undergoes overbout correction
LDO’s price fell from $1.32 on July 15 to $1.04 on July 16, a 20%-plus drop. The token’s sharp downside took its cues from several bearish technical indicators, including its daily relative strength index (RSI) and its 100-day exponential moving average (EMA).
LDO’s latest decline came after it rallied more than 150% in just two weeks, a move that pushed its daily RSI above 70 on July 15, thus making it overbought.
An overbought RSI signals that the rally may be nearing an end as it prepares for a short-term pullback.
Meanwhile, more downside signals for the Lido DAO token came from its 100-day EMA (the black wave in the chart above) near $1.30, which blocked LDO from extending its 150% price rally.
In its early stages, after its RSI crossed 70 for the first time in its history, it resembles the correction of the LDO in April 2022. Notably, the Lido DAO token underwent a 90%-plus price drop to reach $0.39, its all-time low by mid-June 2022.
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While this does not have an exact bottom in sight, it increases the LDO’s potential to repeat the April-June 2022 correction. The token’s interim downside target is seen near its 50-day EMA (red wave) at $0.90, another 20% downside from today’s price.
On the other hand, a break below the 50-day EMA risks the LDO crashing to around $0.75, which matches the 0.618 fib line of the Fibonacci retracement graph from the $0.39-swing low to the $1.31-swing high.
Ethereum 2.0 is expected in September
On July 15th, Ethereum developers confirmed that their network’s transition from proof-of-stake to proof-of-stake, dubbed “The Merger” or “Ethereum 2.0”, would tentatively happen on September 19th.
LDO surged nearly 25% on the day of the announcement due to its close relationship to Ethereum.
Specifically, LDO will serve as the governing token on liquid staking platform Lido, which has locked up more than 4.13 million ETH (worth about $5 billion) to the official smart contract of the merger on behalf of its users.
After Ethereum’s announcement, the number of Ether deposited into merged smart contracts through Lido increased.
Lido is currently the largest provider by total value, and a successful merger launch could bring more users to Lido, increasing demand for LDO tokens.
Therefore, a technical correction in LDO’s price could follow a retracement towards the 100-day EMA, if Ethereum’s proof-of-stake chain project comes to fruition on time.
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