The Yearn Finance (YFI) decentralized finance protocol entered an uptrend after announcing a token buyback program. But this was not accompanied by an increase in token trading volume.
Generally speaking, price increases that are not accompanied by volume growth indicate an artificial movement. In this sense, the YFI enters a correction zone, the data point out
The chart below, taken from the TradingView platform, highlights this behavior. While the price of the token continued to rise, purchase volumes fell steadily.
Consolidation or correction
In the three weeks after the announcement, the price of YFI has appreciated by almost 100%, from US$20,000 to the current US$38,000.
Red bars represent selling strength, while green bars indicate buy. The graph indicates that traders keep buying, but in smaller and smaller amounts. That's why the volume bars keep decreasing.
Normally, when price and volume diverge, the asset tends to correct itself. Or, if the trend continues, the price tends to get stuck in a sideways zone. In its view, the YFI can, at best, stop its price hike until the market regains optimism.
Another relevant indicator is the Relative Strength Index (RSI), which indicates the level of purchasing strength. YFI has a current RSI of 70, indicating an overbought in its price. That is, one more sign that the movement must have reached its ceiling.
It is important to emphasize that the buying force has not disappeared from the market, it is only decreasing. If YFI resumes crucial price levels, the uptrend should be re-established.
Key level at $40K
Generally speaking, the 0.618 Fibonacci level has limited the YFI's bullish potential. This level corresponds to the price of US$40,113, which is below the high of the last seven days.
In fact, the YFI reached US$ 41,363, but it did not have the strength to move forward or hold this support.
If bulls manage to push YFI price above the 0.618 line decisively, they may turn the $40k resistance into new support. In this scenario, the YFI's next bullish target is the 0.5 Fibonacci line, around $53,000.
However, in case of failure, the price tends to retreat and undergo one more correction. If that happens, first support is the 0.78 Fibonacci region, or around $24,000. Such a move would lead to a drop of up to 37% compared to the current price.
YFI is quoted at US$38,071 at the time of this writing, down 1.7% in the last 24 hours.
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