AXS, the original token of Axie Infinity, a non-funded token game (NFT) built on the Ethereum blockchain, has raised more than 100% in the quarter to date (QTD) to refresh a new record. over $155.
However, the cryptocurrency is now at risk of sharing some of the recent developments as an important technical indicator called the Relative Strength Index (RSI) and showing overbought ratios. This could result in an adjustment of less than $90 – a drop of about 40%.
The bearish outlook appears after examining the relationship between AXS price and its RSI. In detail, when the RSI turns above 70, it is essentially asking AXS for lateral consolidation or later.
But either way, the test ends with a test of the 20-day exponential moving average (20-day exponential moving average; green wave in the chart below) as a temporary support level.
AXS/USD daily price chart with its reaction to RSI values above 70. Source: TradingView
For example, since July 1, 2021, the RSI has closed above 70 three times, each time asking price to reach the 20-day moving average within seven to 30 days. This made AXS buy amid an overbought RSI reading, which is a dangerous excuse for traders, increasing the potential for losses in the short term.
As a result, the Axie Infinity token could follow a similar downtrend in the coming days/weeks with the next downside target around $87. However, if the price continues to rise, as it did after the overbought signal in July, the downside target for AXS climbs to $90 or higher.
Is Hodling the Best Strategy?
The 20-day EMA served as a buying indicator for traders after the correction caused by the RSI. Specifically, traders decided to buy at the bottom with the expectation that AXS price will test again and close above its previous highs.
Thus, it is clear that traders who did not sell their AXS assets during the price correction against the 20-day EMA managed to make a decent paper profit – the Axie Infinity token has grown by more than 2500% since July 1st.
The growing AXS tool in the virtual world of Axie Infinity called Lunacia has become one of the main catalysts of demand among players and traders. In detail, players maneuver colorful creatures called Axi to earn two types of tokens.
The first, known as Small Love Potions (SLP), is awarded for successful battles; It can be removed or reused to create new hubs. Meanwhile, the second token, AXS, can be earned by winning seasonal tournaments or selling Axies in the dedicated indoor Axie Infinity Market.
According to Token Terminal, Axie Infinity had an active user base of $1.85 million as of Monday, up 4,500% from April, with cumulative revenue for the same period of $815 million. This made Sky Marvis, Axie Infinity, the fifth largest video game company in the world by market capitalization.
The best gaming companies in the world. Source: messari
Strong fundamentals boosted traders’ confidence in AXS, which explains the ability to bounce back every time after the sharp 20-day EMA correction.
AXS Strike Service, DEX Launch
The recent acquisition at Axie Infinity Markets also comes from a new feature that allows AXS holders to set their tokens for profit. Since its launch on Thursday, the effort feature has amassed over 12.44 million AXS tokens (~$1.88 billion today).
AXS Control Panel. Source: Axie Infinity
The price effectively removes active token offers from circulation, which, against the background of increased demand for the asset, tend to raise prices.
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Meanwhile, Sky Mavis announced that it will launch a decentralized exchange on the Ronin Chain linked to Ethereum. As such, the company aims to provide players with faster AXS and SLP liquidity for players while playing without having to rely on manuals to buy or trade tokens.