As the regulatory landscape in the crypto arena turns in favor of real-world asset tokenization platforms, Ondo Finance, a real-world asset tokenization infrastructure, has gained traction. Ondo Finance’s token, ONDO, has broken above a multi-month accumulation period as the US Securities Exchange Commission (SEC) is setting up a regulatory framework around RWA.
ONDO ends two months of consolidation
ONDO broke an elongated consolidation phase that lasted over a couple of months, just at the beginning of May. When a token ends its accumulation period and surges past the upper limit, it means that the market may be transitioning into a more bullish phase after an extended period of sideways price action.
As far as the accumulation process is concerned, large players usually accumulate their position slowly when the price is ranging within a certain limit. By breaking out above the resistance level, ONDO gives the signal that there is now more buying interest than selling interest. This breakout can be regarded as an indication of the strength of bulls because now the previous resistance level may act as support.
ONDO breaks major resistance during early May
The token had crossed some resistance lines, such as the 50-day moving average and the 200-day moving average, during the early part of May. This is considered a very bullish trend as the 50-day and 200-day moving averages are always taken into consideration by investors when determining the overall trend of the market.
Once the token passes above these levels, it becomes an indication that there is a shift from the previous bearish or neutral trend to a bullish one. The 50-day moving average will be used to determine the prevailing trend, whereas the 200-day moving average is seen as one of the major factors influencing the trend. Passing above these levels is an indication of increased buying pressure. This led to improved sentiment among investors.
However, after the price went above the 200-day MA, the sellers were quick to take profits at this level. Although the price started to slide along the 200-day MA, it was not able to hold above this level for too long.
Sell-off above 200-day MA drags prices down
The price could not remain above the 200-day moving average since this is usually an area where many people make trading decisions. As a result of the breakout, the sellers and buyers were probably taking their profits at this point, which led to selling pressure at this level.
On the other hand, some traders who consider the 200-day moving average as a major technical level probably went into short trades or were waiting for further confirmation before making their entry. Consequently, the buying power could not be sufficient to withstand the selling pressure, and thus the price dropped below this level.
SEC’s announcement added some hype to the price
But once again, the SEC’s announcement has sparked some energy, and the prices have gone above the 200-day MA. But the question is, will it sustain?
As shown in the chart below, ONDO is trading inside a cup and handle pattern. Currently it is forming the handle, making lower lows and lower highs. Inside a cup and handle pattern, market psychology gradually shifts from weakness to strength through different phases.
ONDO is set to sustain above the 200-day MA
The formation starts with a fall where the selling pressure causes a fall in the price. As the fall comes to an end, sellers lose their grip, while buyers quietly take positions. It results in the rounding of the bottom, which makes up the “cup” where the market changes from being bearish to neutral. The price rises slowly as buyers become more interested.
When the price moves to the top of the cup formation, many of those who purchased earlier or got stuck during the last downtrend start booking their gains. This leads to a brief consolidation phase, which is referred to as the “handle.” The handle is typically a phase where weak players sell out.
If the buyers remain in control and the price moves above the handle resistance level, the breakout is usually seen as confirmation that the bulls have taken control of the price. In essence, this pattern is indicative of a market that is transitioning from an accumulation phase to a breakout phase.
According to the relative strength index (RSI) that has been showing higher highs on the 30-day timeframe, there is a possibility that ONDO’s bullish momentum might be gaining strength. Higher highs in the relative strength index mean that the buying pressure has been rising over time, meaning that traders have been accumulating the token at higher prices.
This is normally an indication that the momentum beneath it is propelling the recovery in prices rather than a temporary surge. In case the RSI continues to move upwards, then this will be an indication that the buyers remain in charge, making it more likely that ONDO will continue at the recovered levels.
