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Here’s Why Convex Finance (CVX) Will Pump After Ethereum’s Shanghai Upgrade

The price of Convex Finance (CVX) has formed a double bottom pattern and could increase by more than 350% when the pattern is confirmed. In addition, the high demand after the Shanghai upgrade of Ethereum is driving this.

High demand after the Shanghai upgrade

After the Shanghai update tomorrow, the Liquid Staking market will easily reach $177B ETH currently outside staking. This is an extremely large number compared to the entire DeFi market, which is only about $67,8B and the Liquid Staking industry is $16.8B. Therefore, the battle to build liquidity pools on Curve will be the main factor to help projects win and capture a large share of the Liquid Staking market.

Therefore, LSD projects must have their own strategy to attract ETH to their liquidity pool because the thicker the liquidity pool, the lower the slippage for users when trading, and from there, they can retain users in the long term. To do this, they must provide the most attractive rewards for their liquidity pool. This means that they must have voting rights on Curve Finance.

As Curve Finance’s governance token is veCRV, not CRV, veCRV will be the main factor in this game.

With its smart operation, Convex Finance (CVX) has attracted most of the CRV holders to stake on its platform. This helps Convex hold over 50% of veCRV at present and can directly impact the rewards in liquidity pools.

This means that any project that wants to hold the life-and-death decision-making power on Curve Finance must hold Convex Finance. As CVX is Convex Finance’s governance token, the demand for CVX will be very high in the future. This can promote a strong increase in the price of CVX.

Double bottom pattern

The price of Convex Finance (CVX) has been below the 20-week MA line since May 2022. During this time, the price reached a yearly low of $3 in June of the same year and began to recover.

The recovery turned out to be a dead cat bounce as the price of CVX was rejected at the resistance level of $8.5 and fell back to the support level of $3 once again in January 2023. When combined with the low level created in May 2022, we see the formation of a double bottom pattern, combined with a bullish divergence in the weekly RSI indicator. This is a bullish pattern that often leads to a reversal of the trend to an upward trend.

Indeed, the price of CVX has risen sharply since then and broke above the 20-week MA line with a large bullish candle. After the initial rejection, it succeeded in turning this MA line into support (blue arrow) last week. Therefore, it is likely to reach the long-term resistance level of $8.5 in the near future.

Breaking out above this area will confirm the formation of a double bottom pattern with a target of $24.2, marking an increase of over 350% from the current price level. This target is calculated by connecting the height of the pattern to the breakout point.

During the upward movement, there is a significant resistance zone at $15. The price needs to break out above this area to reach the target of the pattern.

CVX/USDT weekly chart. Source: TradingView

Conclusion:

Both fundamental and technical principles support the continuation of CVX’s uptrend. The nearest target is found at $8.5, while the next targets are found at $15 and $24.22.

Disclaimer: Please note that this article is for informational purposes only and should not be taken as investment advice. As an investor, it is important to do your own research before making any decisions. We are not responsible for any investment decisions you make based on this information. Not Financial Advice.

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