The price of Lido DAO (LDO) has increased by about 400% since the beginning of the month to reach $2.22 on July 28, the highest level in more than two months.
The price of LDO benefited mainly from its association with Ethereum, the leading smart contract platform in terms of total value locked (VLT) and market capitalization.
LDO in particular serves as a token of governance within the Lido DAO ecosystem, a project that offers staking services for Ethereum.
$ETH move taking the entire ecosystem with it.
—Luke Martin (@VentureCoinist) July 27, 2022
When $ETH moves, the entire ecosystem is dragged along. Best moves: Defi: $LDO $UNI $BIT $AAVE – Tier 2: $OP $MATIC. And of course, being a cryptocurrency, $ETC is the biggest pump. pic.twitter.com/hN9Rd6Yr9j — Luke Martin (@VentureCoinist) July 27, 2022.
The practice of betting allows users to earn passive income without the need to sell their coins. It also allows transactions to be validated and the blockchain to be secure. In return, the protocol provides rewards to stakeholders in the form of new tokens collected and fees collected.
Ethereum could become a full proof-of-stake blockchain by September 19, the tentative Merger date. A successful transition to Proof of Stake may lead to greater demand for Lido DAO services in the future.
Lido DAO has remained the main provider of staking services on Ethereum since August 2021. As of July 28, it had deposited 4.14 million Ether (ETH) into the Merge’s official depository contract, Eth2, through its staking contracts.
This partly explains the more than 140% rise in LDO two weeks after the Merge release date was announced – from $1.29 on July 14th to $2.22 on July 28th.
Risks of false rupture
Despite strong fundamentals, there is a risk that the continued rise in LDO will catch bulls, mainly due to increasing divergence between their price and momentum.
On a daily chart, the rise in LDO price is accompanied by a decline in the relative strength index, suggesting that the bulls may lose their grip on the market and let the bears take over.
The same clues emerge from the constant divergence between the rise in the LDO price and the fall in its volume, as shown below.
As a result, the LDO market is targeting an imminent correction, with an interim target below at around $1.75, down 17% from the July 28 price. This level coincides with the 0.382 Fib line of the Fibonacci chart shown in the chart below.
On the other hand, the LDO appears to have broken out of a “bullish penny”, a bullish continuation pattern whose profit targets are measured after adding the height of the previous uptrend (flagpole) to the breakout point.
Read: Experts have yet to explain the huge spike in active ETH addresses
This puts Lido DAO on course above $3.00 by September, coinciding with the 0.786 Fib line and possibly around the time the Merge was implemented. In other words, LDO could rise 45% from current price levels if the pennant pattern comes true.
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