Anchor Protocol (ANC) returned to bullish formation in May this year after plunging more than 70% in the previous two months.
Future pullback risk
The price of ANC rebounded slightly more than 42.50% between May 1 and May 6, reaching $2.26, the highest level in three weeks. Nonetheless, the coin experienced a sell-off on May 6 and May 7 after hitting what appeared to be a confluence of resistance.
This includes the 50-day exponential moving average (50-day EMA; red wave) and the 0.786 Fibonacci retracement of the Fibonacci retracement from the $1.32 swing low to the $5.82 swing high, as shown in the chart below Show.
A sustained pullback could see the price of ANC plummet to its rising trendline support, coinciding with the floor near $1.67 before the price rose 175% between Feb. 20 and March 5.
Meanwhile, a decisive break below the trendline puts ANC at risk of falling to $1.32 near the 1.00 Fibonacci line, nearly 30% below today’s price of $1.92.
Conversely, ANC’s daily Relative Strength Index (RSI) reading has risen from below 30 (oversold) to around 50 over the past seven days, suggesting upside strength in the Anchor market unless the reading exceeds the overbought threshold of 70.
Thanks to a favorable RSI, Anchor Protocol coin is likely to break above the confluence of resistance near $2.28, with its next upside target lurking near the 0.618 Fibonacci retracement near $3.
Anchor Protocol TVL hits record high
The sharp upward pullback in the Anchor Protocol market also coincided with continued capital inflows into its liquidity pools.
In detail, the total value locked (TVL) within Anchor’s savings and lending pools soared from $8.6 billion at the beginning of the year to $16.48 billion on May 7, an increase of almost 100%. In doing so, Anchor’s reserves also hit a record $17.15 billion on May 5, according to DeFi Llama.
Users continue to put money into Anchor Protocol, mainly because of its high annual yield of 19.5%. This makes it the largest liquidity pool in the Terra (LUNA) blockchain ecosystem.
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Anchor has also expanded its services to Avalanche (AVAX), another base layer blockchain, which is now planned to run on the Polkadot (DOT) ledger.
ANC is a governance token in Anchor Protocol’s “decentralized money market” ecosystem. It also provides holders with a percentage of the protocol’s return. Therefore, the expansion of Anchor Portocol to other blockchain ecosystems is expected to generate more demand for ANC.
Additionally, proposals such as voting escrow ANC, which enables holders to lock up their tokens for a preset period in exchange for better voting rights and staking rewards, may also drive demand for ANC.
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