Lido DAO (LDO) price reached $2.22 on July 28. It has skyrocketed roughly 400 percent since the beginning of the month. In other words, it saw its highest level in more than two months. So, will the rise continue? Why did LDO go up? Here are the reasons for the rise and the warning of analysts…
Lido DAO splashes with Merge excitement
The LDO price has benefited greatly due to its relationship with Ethereum, the leading smart contract platform with total value locked (TVL) and market cap. As we have also reported as Kriptokoin.com, LDO serves as a management token in the Lido DAO ecosystem, a project that provides staking services for Ethereum. The Stake app allows users to earn passive income without the need to sell their coins. It also helps verify transactions and ensure the security of the Blockchain.
In turn, the protocol offers rewards to stakers in the form of new tokens minted and fees collected. Meanwhile, Ethereum could become a full-fledged Proof-of-Stake (PoS) Blockchain by September 19, the tentative date for Merge. According to experts, a successful transition to proof-of-stake could mean demand for Lido DAO services in the future. Lido DAO remains the leading Ethereum staking service provider since August 2021. As of July 28, Merge’s official deposit contract has added 4.14 million Ethereum (ETH) to Eth2 via staking contracts.
Lido owns 1/3 of staked ETH
So the DeFi platform owns a third of the ETH staked for all Merge on the Beacon Chain. It is argued that this is important in this price behavior of the Lido DAO token. This explains LDO’s rally from $1.29 on July 14 to $2.22 on July 28, two weeks after the announcement of Merge’s release date. Lido DAO allows you to get freely tradable stETH for every ETH staked and avoid locking coins.
Thus, Lido DAO was able to attract a large number of investors. According to experts, if this number continues to increase, the protocol will have an incredible impact on the Ethereum network. The fact that LDO is the token of the Lido DAO gives its holders voting rights. At the end of June, a vote was initiated to limit ETH staking on the platform. But despite concerns about Ethereum 2.0 staking being too centralized, the majority of LDO holders voted against limiting it.
A wrong break
Despite solid fundamentals, LDO’s continued rally risks trapping the bulls, primarily due to the growing divergence between its price and momentum, according to one analyst. According to analyst Yashu Gola, on the daily chart, LDO’s price increase is accompanied by a drop in the relative strength index data. This suggests that the bulls may lose their dominance of the market while allowing the bears to take over. The same cues emerge from the continued divergence between rising LDO price and falling volumes, as shown below.
Therefore, the LDO market is pointing to a close correction with a temporary bearish target of around $1.75, down 17 percent from the price on July 28. This level coincides with the 0.382 Fib line of the Fibonacci retracement chart shown in the chart below.
On the other hand, LDO appears to be breaking out of a bullish continuation pattern, a bullish continuation pattern with profit targets after adding the height of the previous uptrend (flagpole) to the breakout point. According to Gola, this puts the Lido DAO above $3.00 by September, which coincides with the 0.786 Fib line, potentially coinciding with the time of the Merge presentation. In other words, LDO could rise 45 percent from current price levels if a bullish pennant pattern emerges.
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