The price of the Lido DAO (LDO) fell heavily a day after its key momentum oscillator crossed into “overbought” territory.
LDO undergoes overbought correction
The price of LDO fell to $1.04 on July 16, from $1.32 on July 15, a drop of over 20%. The coin’s sharp decline took its signal from several bearish technical indicators, including its daily relative strength index (RSI) and its 100-day exponential moving average (EMA).
LDO’s latest drop comes after rising more than 150% in just two weeks, a move that simultaneously pushed its daily RSI above 70 on July 15, thus leaving it overbought.
An overbought RSI signals that the rally may be over when it is ready for a short-term pullback.
Meanwhile, more downside signs for the Lido DAO token came from its 100-days EMA (black wave in the chart above) near $1.30, which prevented LDO from extending its 150% price rally.
In its early stages, price action closely resembled the LDO’s correction in April 2022, when its RSI crossed 70 for the first time in history. Notably, by mid-June 2022, the Lido DAO token was down by over 90% to reach $0.39, its all-time low.
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This enhances the LDO’s ability to repeat the April-June 2022 correction, even if no exact bottom is visible. That said, the coin’s interim downside target appears near its 50-day EMA (red wave) at $0.90, which is 20% below today’s price.
On the other hand, a break below the 50-day EMA would put the LDO at risk of a crash to around $0.75, which coincides with the 0.618 Fibonacci line of the Fibonacci retracement graph from a $0.39-swing low to $1.31-swing high. has been drawn.
Ethereum 2.0 Expected in September
On July 15, Ethereum developers confirmed that their network’s much-anticipated transition from proof-of-work to proof-of-stake, dubbed “The Merge” or “Ethereum 2.0”, would take place tentatively on September 19.
LDO surged nearly 25% on the day of the announcement due to its close relationship with Ethereum.
Specifically, LDO serves as a governance token in Lido, a liquid staking platform that has locked more than 4.13 million ETH (about $5 billion) in Merge’s official smart contracts on behalf of its users.
Following the announcement of Ethereum, the number of Ether deposited in Merge Smart Contracts via Lido increased.
Lido is currently the largest provider by total value, a successful merge launch could bring more users to Lido, which, in turn, could increase the demand for LDO tokens.
Therefore, a technical correction in LDO price could be accompanied by a rebound towards the 100-day EMA if Ethereum’s plans to become a proof-of-stake chain come in time.
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