The price of Lido Finance’s governance token LDO has increased by 78% in the last week. According to CoinMarketCap data, this made LDO one of the top-performing cryptocurrency assets in terms of gains over the last seven days.
LDO’s price was up 29% in the last 24 hours as of press time, indicating that it was still on an uptrend. LDO tokens worth $274 million were traded during the same time period. This resulted in a more than 500% increase in daily trading volume.
LDO was overvalued at the time of publication, with a Market Value to Realized Value (MVRV) ratio of 150.51%. Its market value (currently $1.91) was significantly higher than its realized value (the price at which the asset was recently bought and sold).
This meant that investors who distributed their LDO holdings since the beginning of the year made twice as much money.
But how long will this go on?
A daily chart analysis of LDO’s performance revealed that bears may be preparing to re-enter the market. This could result in a decrease in the price of LDO.
Key momentum indicators have steadily risen over the last nine days, resting at overbought highs at press time. At press time, the LDO’s Relative Strength Index (RSI) and Money Flow Index (MFI) were at 77.96 and 93.37, respectively.
When an asset’s RSI and MFI are in the overbought zone, the asset’s price has been rising for a long time. As a result, it may be overextended, implying that a price correction or reversal is on the way.
Buyers in the market are typically exhausted at overbought highs and are unable to initiate any further price rally. As a result, a drop in the price of LDO may be on the horizon in the coming days.
Furthermore, despite the recent price increase, LDO’s Chaikin Money Flow (CMF) has been on a downward trend since January 6. This could result in a bearish divergence.
If the price of an asset rises while the CMF falls, this may indicate a bearish divergence between the asset’s price and the underlying buying and selling pressure. This divergence indicates that the asset’s price may not be sustained and that a price reversal or correction is possible.
Finally, at the time of publication, the price of LDO was extremely volatile. The narrowing of the gap between alt’s upper and lower Bollinger Bands revealed this.
When a cryptocurrency’s price is highly volatile, it means that it is subject to frequent and significant price fluctuations. As a result, extreme caution is advised.
