Anchor Protocol rebounds sharply after falling 70% in just two months — what’s next for ANC?

Anchor Protocol (ANC) regained its bullish form in May after plunging more than 70% in the previous two months.

Downside risks ahead

The price of ANC rebounded just over 42.50% between May 1 and May 6, reaching $2.26, its highest level in three weeks. Nonetheless, the token experienced a sell-off on May 6-7 after hitting what appears to be a confluence of resistance.

This consists of a 50-day exponential moving average (50-day EMA; the red wave) and a 0.786 Fib line of the Fibonacci retracement chart, drawn from the $1.32 low to $5.82 high, as shown in the graph below. .

ANC/USD daily price chart. Source: Trading View

Continued pullback could see ANC price plunge towards its rising trendline support, coinciding with the low near $1.67 that preceded a 175% price rally between Feb. 20 and Feb. 5. March.

Meanwhile, a decisive break below the trendline would risk dropping the ANC towards the 1.00 Fib line near $1.32, which is almost 30% below the current price of $1.92.

Conversely, daily ANC Relative Strength Index (RSI) readings have moved from below 30 (oversold) to around 50 over the past seven days, hinting at upward forces on the anchor market unless readings cross 70, the overbought threshold.

Due to a favorable RSI, the Anchor Protocol token has the potential to break above the confluence of resistance around $2.28, with its next upside target lurking around the 0.618 Fib line near $3.

Anchor Protocol TVL Reaches All-Time High

The strong upward retracement in the peg protocol market also coincides with a continued inflow of capital into its liquidity pools.

In detail, the Total Locked Value (TVL) inside the Anchor Savings and Borrowing Pools jumped to $16.48 billion on May 7 from $8.6 billion at the start. this year, an increase of almost 100%. In doing so, Anchor’s reserves also hit a record high of $17.15 billion on May 5, DeFi Llama data shows.

TVL anchor protocol. Source: DeFi Lama

Users continued to commit funds to Anchor Protocol primarily due to its higher annual return of 19.5%. This has made it the largest pool of liquidity in the Terra (LUNA) blockchain ecosystem.

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Anchor also has extended its services to Avalanche (AVAX), another base layer blockchain, and now plans to operate on top of the Polkadot (DOT) Ledger.

The ANC is a governance token within the Anchor Protocol’s “decentralized money market” ecosystem. It also offers holders a percentage of the protocol’s revenue. Thus, the expansion of Anchor Portocol into other blockchain ecosystems promises to generate more demand for ANC.

Additionally, proposals such as vote-locked ANC, which allows holders to lock their tokens for a predefined period in exchange for better voting rights and staking rewards, could also increase demand for ANC.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.

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