LDO’s chances of holding onto its gains is increased by Ethereum 2.0’s September tentative launch. Lido DAO ( ) fell heavily on September 1, after its momentum oscillator entered “overbought” territory.
LDO’s prices plunged to $1.04 on July 16, from $1.32 July 15, a drop of 20%. The sharp downturn in the token’s price was influenced by multiple bearish technical indicators including its daily relative strength indicator (RSI) as well as its 100-day exponential moving mean (EMA).
LDO’s most recent plunge occurred after it rose over 150% within two weeks. This move simultaneously pushed LDO’s daily RSI over 70 on July 15, making it overbought.
A overbought RSI signal that the rally is nearing an end and prepares for a short-term pullback.
In the meantime, the Lido DAO token received more negative cues from its 100-day EMA near $1.30. This halted LDO’s 150% price rally.
The initial price action was similar to LDO’s April 2022 correction, when its RSI reached 70. This is the first time that its RSI has crossed over 70 in history. Notably, the Lido DAO token had experienced a price drop of 90% to $0.39, which was its record low, in mid-June 2022.
LDO has the potential to repeat its April-June 2022 correction. However, there is no bottom in sight. Despite this, the token’s interim downside target is $0.90 (the red wave), which is 20% lower than today’s price.
A break below the 50 day EMA could lead to LDO falling to $0.75. This coincides with the 0.618 Fib lines of the Fibonacci retracement chart, which ranges from $0.39-swing lows to $1.31 highs.
Ethereum 2.0 is expected to be released in September
On July 15, Ethereum developers confirmed the network’s long-awaited transition from proof-of work to proof-of stake. This was referred to as “the Merge” (or “Ethereum 2.0”) and would take place tentatively on September 19.
Due to its close ties with Ethereum, LDO saw a nearly 25% increase in trading volume on the day of the announcement.
LDO is a governance token at Lido. This liquid staking platform has deposited over 4.13 Million ETH (worth approximately $5 billion) into Merge’s official smart contract for its users.
After Ethereum’s announcement, the number of Ether deposited via Lido into the Merge smart contract via Lido increased .
A successful Merge launch could increase the number of users who use Lido as their largest provider, which could in turn boost demand for LDO tokens.
If the Ethereum’s plan to become a proof of-stake chain is successful, a technical correction could be followed by a rebound towards the 100-day EMA.