The price of Lido DAO (LDO) rose on August 3, mainly due to similar bullish movements in other cryptocurrency markets and the growing euphoria surrounding the Ethereum network upgrade in September.
On the daily chart, LDO price reached a daily high of $2.40 a day after bottoming locally at $1.84. The sharp reversal to the upside saw a gain of nearly 30% in one day, suggesting strengthening of the Lido DAO bullish trend by traders.
Lido DAO is a liquid staking solution for Ethereum by total value deposited. In other words, it allows users to participate in the operation of Ethereum’s upcoming proof-of-stake (PoS) chain in exchange for daily rewards.
Ethereum’s Ether token (ETH) has appreciated more than 90% since mid-June, in part due to rumors about its PoS blockchain upgrade called The Merge, scheduled for September.
Lido DAO, the largest provider of gambling services to The Merge, has simultaneously benefited from the trend, with LDO, its governance token, rising nearly 500% in the same period.
Notably, the total number of Ether locked in The Merge smart contract – also called ETH 2.0 – via Lido has gone from 3.38 million on June 13 to 4.16 million on August 3, according to DeFi Llama.
Charts point to a rally in LDO prices
Also, LDO technicals appear skewed to the upside due to its “bull flag.” This technical setup usually appears during an uptrend, when the price consolidates lower within a descending channel after a strong move higher.
LDO has been forming a similar pattern. On the daily chart, the price of the token has reversed course after undergoing a strong uptrend that reached a high of around $2.66 on July 28.
As a result, the Lido DAO token is now eyeing a breakout above its current descending channel range, similar to the move higher that followed its bullish pennant formation in July.
As a general rule, the bull flag profit target is in length equal to the size of the previous uptrend, called the “flag pole”, or $4 for September, 65% more than the current price.
Scenario in case the bull flag is not met
On the other hand, the potential for a bull flag to reach its bullish target is around 67%, according to research by the Samurai Trading Academy. Therefore, the LDO bull flag could fail if its price breaks below the lower trend line of the pattern.
The trend line coincides with the confluence of the support at $1.91, which capped the LDO’s rise in late July, and the 20-day EMA (the green wave in the chart below) at $1.80.
Therefore, a breakout of the bullish flag, or a drop below the support confluence, could see LDO targeting the 50-day EMA near $1.43 as a target on the downside.
This level coincides with the 0.236 Fibonacci level near $1.42, which acted as a price floor in February and May.
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