LDO price faces downside risk on sell the news sentiment coupled with a bearish technical setup.
Lido DAO (LDO) is down over 40% in the last 30 days and it will have more room to fall in the coming days amid a potential selling event like a merger.
Lido DAO Ether deposits projected to grow 160% by 2022
According to the latest data, Lido DAO is the largest Ethereum staking service that has deposited more than 4.14 million native blockchain assets, Ether (ETH), into the Ethereum 2.0 smart contract on behalf of its users, according to the latest data.
The total value of ETH 2.0 provided by the provider. Source: glass node
In comparison, Lido DAO’s total stake earlier this year was around 1.6 million ETH. The boom reflects growing demand for Lido DAO services ahead of Ethereum’s planned transition from Proof of Work (PoW) to Proof of Stake (PoS) through a September 15 merger.
LDO, the governance token in the Lido DAO ecosystem, has also seen unprecedented price gains of more than 350% over the past few months after bottoming out at $0.39 in June.
However, the token’s sharp correction over the past month raises the possibility of an extended downtrend after the pre-merger hype dies down. In addition, the technical setup also warns of possible price drops in the future.
LDO suggests a descending triangle reversal
The most recent selling period in the Lido DAO market began after the LDO peaked at $3.10 on August 13th. This downtrend has drawn a pattern that looks like a descending triangle.
Descending triangles forming above indicate bullish exhaustion. In theory, a descending triangle breakout below the lower trendline could sink the price to a level equal to the maximum height of the triangle.
Related: Will the Ethereum merger cause a crash or revitalize the crypto market? | Find out now in the market report
The LDO is now testing the bottom of the triangular trendline around $1.79-$1.82 as support. The token could drop to $1.17 if it breaks below the support level on rising trading volume. In other words, a price drop of 35% from the current price level.
Daily LDO/USD chart showing descending triangle breakout. Source: Trade View
Conversely, a bounce off the $1.79-$182 support area could see the LDO test the upper descending triangle trendline at around $2.10 as resistance.
Additionally, a decisive break above the upper trendline could invalidate the bearish setup outlined above.
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