A widely followed crypto analyst is staying bullish on Bitcoin (BTC) while updating his outlook on layer-1 blockchain Aptos (APT) and one memecoin that has printed massive gains during the last 10 months. In a new strategy session, crypto trader Altcoin Sherpa tells his 224,300 followers on the social media platform X that key metrics […]
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Shiba Inu's massive gains all across October may pare on potential bearish divergence signals and an overvalued relative strength index.
Shiba Inu (SHIB) may see a pullback by almost 25%-35% on fears that the cryptocurrency's excessive price rally in October has left it overvalued, a key indicator shows.
Dubbed Relative Strength Index (RSI), the indicator measures the magnitude of an instrument's recent price changes to evaluate its oversold and overbought conditions. The result can be anywhere between the number 0 and 100, with a reading below 30 showing the instrument's oversold and above 70 showing its overbought status.
SHIB crossed above 70 on Oct. 3 and peaked around 94 three days later. Ideally, its overbought reading could have resulted in price correction. But SHIB continued its rally as the monthly session progressed, eventually rising over 574% to its five-month high at $0.00004860 on Tuesday.
On the other hand, Shiba Inu's RSI slipped lower, thus creating a broad divergence between SHIB's price and momentum. That reflected an underlying weakness in the cryptocurrency's ongoing uptrend, raising possibilities of a pullback in the coming days.
Additionally, the last three price candles on the Shiba Inu daily chart formed a sequence of higher highs at their close. But that coincided with declining trading volumes three days in a row, thus further validating the SHIB uptrend's underlying weakness.
That does not mean an immediate price correction. According to the breakout that followed the formation of a Bull Pennant indicator, SHIB bulls appeared to have been eyeing $0.00005222 as their next upside target.
A Fibonacci Retracement graph between the Shiba Inu's swing high of $0.00003466 and the swing low of $0.00000621 presented a string of levels that earlier served as support and resistance.
For instance, the 1.618 Fib line of the graph coincided almost with the Shiba Inu's Bull Pennant target, just a two-notch upward at $0.00005224.
Thus, the resistance confluence of the 1.618 Fib line and Bull Pennant target raised SHIB's potential to test the $0.00005222-$0.00005224 price range before undergoing a strong price correction.
Related: SHIB plummets 20% as Elon Musk reveals he owns none
In doing so, the cryptocurrency's next downside target is near the 1.0 Fib line of $0.00003466, almost 25%-35% below the current price and $0.00005224.
On the other hand, a break above the 1.0 Fib line risked invalidating the entire bearish setup temporarily. That said, a bullish move may still make SHIB excessively overvalued based on its RSI readings, raising the potential of a correction in future sessions.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The governance token earlier rallied exponentially despite dull price actions in the broader cryptocurrency market.
A supersonic rally in the Axie Infinity market that saw its native token AXS surge by 972% in just 23 days is now risking exhaustion.
The AXS/USD exchange rate plunged to as low as $16.02 on Monday, four days after topping out at $29.86. In doing so, the pair attempted to neutralize its extremely overbought sentiments, as flashed by its daily relative strength index (RSI) that treaded above 84 last week, showcasing profit-taking sentiment among investors.
AXS/USD showed signs of rebound at $16.38, a level that coincides with the 61.8% Fib level that—in turn—constitutes a Fibonacci retracement graph made from $23.98-swing high to $4.07-swing low. The two levels represent the top and bottom of the AXS/USD’s current curve range.
Additional support came from the pair's 20-day exponential moving average (20-day EMA; the green wave). The wave (now near $15.38) was instrumental in strengthening AXS/USD’s upside bias at the beginning of this year, capping wild downside retracements and sending prices in the direction of their previous uptrend.
Previous top-to-bottom Fib retracement setups present th 38.2% Fib level as a key reversal indicator. For example, AXD/USD rebounded by almost 225% after testing $3.62—the 38.2% Fib level during the late March 2021's pullback move.
Similarly, the level held the AXS/USD's bearish attempts during April-May before giving up and paving the way for a price crash, as shown in the chart below.
Therefore, the previous fractal hints at an extended downside correction for the Axie Infinity token in the sessions ahead. As a result, the current 38.2% Fib level ($11.68) serves as the interim profit target for bears.
Nonetheless, breaking below the 38.2% Fib level could expose AXS/USD to the support confluence of 23.6% Fib level ($8.77) and the 50-day simple moving average (around $8.29).
Despite its latest bearish move, AXS was up more than 2,5000% on a year-to-date timeframe.
In detail, the cryptocurrency serves as a governance token at Axie Infinity, a nonfungible token-based online video game developed by a Vietnamese studio Sky Mavis. Players get to compete and win rewards in an in-house token called Small Love Potion (SLN). In turn, they could use SLN to breed digital pets, called Axies, inside the game.
By doing so, dedicated players can make between 100 to 200 SLP tokens a day on average. That roughly equals $77.8 to $155.6 a day, per the current exchange rate of $0.77 per token.
The play-to-earn feature has been received well by crypto-philes. Just last week, Axie Infinity raked in over $84M in fees in the last 30 days, more than Bitcoin and Ethereum made in protocol revenue, and more than all the top decentralized finance apps, including PancakeSwap, MetaMask, MakerDAO, Synthetix, and others.
Moreover, while AXS can be exchanged on other platforms, 97% of its volume comes from the Axie Marketplace, a dedicated portal to trade digital pets, which, in turn, passes the fees to the Axie Treasury.
According to Axie World, the Treasury now holds about $23.42mm in marketplace fee and $76.15M in breeding fees (fee charged to breed digital pets).
In turn, the fee is given as a weekly yield to users who stake AXS to run and govern the Axie Protocol.
"Axie Infinity has set itself apart from the rest of the pack – crypto games – and continues to rise," commented Mason Nystrom, a researcher at Messari, adding:
"The next major milestone will be the launch of the alpha of its virtual world, Lunacia in Q4."
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
