Understanding the Recent Surge in VELO’s Price and the Impact of the “Sell the News” Event
Velo Labs, the organization responsible for developing Velo Protocol [VELO], has recently made headlines by leveraging BlackRock’s first tokenized fund to introduce innovative financial products to the market.
In a blog post dated September 10th, the company announced that its USDV stablecoin is now backed by an investment in BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL).
This strategic move is intended to enhance the utility of the stablecoin and increase its appeal as both a reliable store of value and a yield-bearing asset.
Response from the Market
The announcement from Velo initially generated interest, with many viewing it as a validation of the company’s strategic vision to expand its market presence.
However, the price movement of Velo’s utility token, VELO, subsequent to the announcement indicated a classic case of a “sell the news” scenario.
Shortly after the news went public, speculators seized the opportunity to take profits from the previous price surge, bringing to a halt a month-long upward trend that had propelled VELO to significant gains.
Velo now joins a growing list of crypto projects that are utilizing BlackRock’s tokenized fund to introduce consumer-oriented products or grant access to yield-generating opportunities.
Earlier this year, Ondo Finance announced plans to shift the backing assets of its U.S. Treasury-backed token (OUSG) to the BUIDL fund.
Explaining the decision, Ondo highlighted that moving $95 million to BlackRock’s tokenized fund would enhance the usability of OUSG and facilitate instantaneous settlements.
Recently, Layer 1 blockchain project Injective introduced a tokenized index for the BUIDL Fund, offering retail users exposure to the fund.
Technical Analysis of VELO/USDT Pair
Data from TradingView indicates that VELO broke support at $0.0155 overnight, plunging to $0.01436 and entering a consolidation phase.
Despite stabilizing following the sharp decline from an intraday peak of $0.0193, VELO is still down by 15% over the past 24 hours.
In the most recent hours, the VELO/USDT pair has been attempting to stage a recovery after converting the former resistance level at $0.0143 into immediate support.
The hourly Relative Strength Index (RSI) is currently below the oversold threshold, standing at 27, indicating substantial bearish pressure on VELO and a deeply oversold market condition.
A daily close above $0.015 would signal a potential continuation of the previous uptrend, which faces resistance around $0.02, a level at which VELO encountered difficulties back in June.
However, a further decline below the current support level would suggest a trend reversal and bring into play stronger support at $0.011, last tested in August.