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Velodrome Finance’s native token, VELO, has skyrocketed over 108% following its recent listing announcement on Binance, hitting a peak of $0.42.
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Trading activity surged astronomically, with volumes increasing by over 2,000%, indicating a heightened retail interest largely driven by FOMO.
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“One trader capitalized on this price surge, reportedly making a profit of $448,000 within mere hours,” according to Lookonchain.
VELO surges over 108% after Binance listing, driven by massive trading volumes and retail interest, but could face a price correction soon.
Is Velodrome Overbought? Understanding Market Sentiment
The recent surge in VELO’s price can be attributed to a frenzy of buying activity as investors rushed to capture potential profits. The spike in trading volumes has resulted in the Relative Strength Index (RSI) reaching an alarming level of 86, a clear indicator of an overbought asset. This situation can often precede a short-term price correction, as buyers seeking to secure profits may initiate sell-offs.
If the hype surrounding the Binance listing diminishes and latecomers, motivated by the fear of missing out (FOMO), begin to take profits, the price rally could come to an abrupt halt, suggesting potential declines ahead.
Source: Tradingview
Furthermore, the Bollinger Bands indicator on VELO’s daily chart suggests a similar overbought condition, with price movements exceeding the upper band. The widening of these bands underscores the volatility surrounding VELO’s price fluctuations in the last 24 hours.
Given the market’s heightened volatility and trading activity, VELO appears to be in an overheated condition, pointing to a possible price retracement.
Declining DeFi Activity and Its Implications for VELO
Velodrome Finance’s overall metrics reveal a concerning trend; the platform, which operates as a decentralized finance (DeFi) solution on the Optimism layer two network, has observed a significant reduction in its Total Value Locked (TVL) over recent months.
Current data from DeFiLlama shows VELO’s TVL at approximately $92.78 million, representing a staggering decline of over 50% from its yearly high of $187 million observed in April.
Source: DeFiLlama
The decline in DeFi activity poses potential challenges for VELO’s long-term prospects. Nevertheless, if TVL continues its recent uptick, there could be a positive effect on price stability in the future.
Analyzing the Long-Term Viability of VELO’s Rally
The surge in VELO’s price has largely been attributed to its recent listing on the Binance exchange, combined with heightened investor interest as indicated by increasing RSI levels. However, should profit-taking begin, it could trigger a reversal of the upward trend.
Compounding the uncertainty is the ongoing stagnation in the overall network activity, as reflected in the declining TVL. Following the initial euphoria of the listing announcement, the sustainability of VELO’s rally remains in question.
Conclusion
In summary, Velodrome Finance’s VELO token has experienced a remarkable rise following Binance’s announcement. However, potential price corrections looms, fueled by high volatility and declining DeFi engagement. Investors should remain vigilant, considering both market dynamics and long-term growth potential before making trading decisions.
