Velodrome Finance [VELO] has shown impressive performance compared to the wider crypto market, gaining over 108% in just 24 hours. Currently, VELO is being traded at $0.325 with a market cap of $287 million.
Recent data from CoinMarketCap indicates a significant increase in retail interest as trading volumes spiked by more than 2,000%. This surge in volumes led to volatile price swings, with VELO soaring from $0.145 to an all-time high of $0.424 in less than an hour before retracing.
The recent rally of VELO was primarily driven by the news of Binance planning to list the altcoin on December 13th. Notably, VELO is already listed on other major exchanges such as Coinbase.
Is VELO Overbought?
The remarkable rally of VELO was initiated by high buying volumes as traders aimed to capitalize on the surge. According to Lookonchain, one trader managed to make a $448,000 profit on VELO within just a few hours of purchasing the token.
The substantial increase in trading volumes has pushed the Relative Strength Index (RSI) to overbought levels of 86, potentially signaling a short-term correction ahead.
In case the initial excitement from the listing subsides and FOMO-driven buyers start cashing out their profits, the upward momentum might slow down, causing a price drop.
The Bollinger bands on VELO’s daily chart also suggest an overbought scenario, as the price surged past the upper band. The widening bands indicate the heightened volatility that has characterized VELO’s price movement over the last day.
Given the considerable volatility and sharp increase in buying volumes, VELO is displaying signs of being overheated, which could foreshadow a downturn.
Decline in DeFi Activity Might Impact the Rally
Velodrome Finance, a decentralized finance (DeFi) platform operating on the Optimism layer two network, has experienced a notable decrease in Total Value Locked (TVL) in recent times.
According to DeFiLlama, the TVL of this protocol currently stands at $92.78 million. Although this figure represents the highest TVL since November, it is down by more than 50% from the yearly peak of $187 million reached in April.
The dwindling DeFi activity could influence the long-term prospects surrounding VELO. Nonetheless, if there is a gradual resurgence in activity, it could positively impact prices.
Can VELO Sustain Its Upward Momentum?
The surge in VELO’s price was primarily driven by its listing on the Binance exchange, with the sudden rise in RSI indicating strong buying interest. Should these buyers opt to take profits following the rally, a reversal in trend could occur.
Additionally, the sluggish network activity highlighted by the DeFi TVL data suggests that the current rally may not be sustainable. Hence, once the hype surrounding the listing fades, VELO is likely to experience a decline.