GMX Price Recovery in Sight: Buyback Proposal Passes, 137-Day Resistance Target
How Will GMX's Buyback Proposal Affect Its Price? | Credit: Hameem Sarwar
Key Takeaways
- GMX recently passed a buyback proposal that will use fees from v1 and v2 to buy GMX.
- GMX fell to a new all-time low in July but bounced, aiming to break out above resistance.
- Will the buyback program positively affect the GMX price, causing a breakout above this resistance?
GMX has had a tumultuous start to 2024, with its price plummeting by nearly 50% since the beginning of the year and hitting a record low on July 5.
However, the tide may be turning, as the price appears to have begun an upward trajectory in July.
Additionally, its recently approved buyback proposal could potentially create a supply shock, which could, in turn, drive up the price of GMX.
The question now is whether this momentum will continue, and if so, what’s the next price target for GMX?
What is GMX’s Buyback Proposal?
On July 20, the GMX board proposed transitioning GMX’s revenue distribution model from “Buyback ETH and Distribute ETH” to “Buyback GMX and Distribute GMX.”
As it stands, The GMX board uses fees earned from the network to buy ETH and then distributes it to users. This creates two issues: First, there is no buying pressure on GMX, and second, there are addresses that continue accumulating Ethereum without contributing to the ecosystem.
The proposal suggests using between 30 and 70% of the fees from GMX v1 and v2 to buy tokens to promote its growth and stability. However, it will also allow users to convert these tokens into ETH and AVAX so as not to worsen the user experience.
The proposal also aims to improve GMX’s value retention by providing buying pressure while maintaining the ETH & AVAX narrative.
Another potential benefit is more liquidity for GMX, which can, in turn, attract more long-term capital. On July 28, the proposal passed with a vote of 97.82% toward it.
In the past 30 days, GMX v1 and v2 fees amounted to 86 million. So, the buybacks can deploy roughly 25 million. At the current price, this would amount to 892,857 GMX tokens, which is 9% of the circulating supply.
It is worth mentioning that the supply of GMX in decentralized and centralized exchanges is only 1.75 million tokens. This represents the liquid supply since it can be freely bought and sold. The buyback estimation is roughly half of this supply.
Additionally, one wallet associated with the team holds over 5.5 million GMX tokens. Also, $168 million with of GMX is staked , which amounts to 6 million tokens. So, a very large portion of the supply is illiquid, meaning the buyback program can cause a very significant buying pressure.
GMX is also undervalued when considering its Total Value Locked (TVL) is nearly three times as large as its market capitalization of $273 million.
GMX Recovers After All-Time Low
GMX’s price has been suppressed by a descending resistance trend line since March 13, spanning 137 days. Initially, this downtrend led to a low of $22.15 on April 13. However, the price rebounded and climbed back up to the resistance trend line on June 6, only to be rejected again.
This rejection triggered another decline, culminating in a new all-time low of $22.10 on July 5. Nevertheless, the price has been rising since then and is now approaching the resistance trend line for the third time.
A crucial aspect of the recent GMX price increase is that it has successfully validated the long-term $24 horizontal area as a support level. However, technical indicators are currently neutral, offering no clear indication of whether the price will break out above the resistance trend line or not.
Specifically, the MACD is hovering slightly above 0, and the RSI is at 50, both of which suggest a lack of momentum in either direction. As a result, the possibility of both a breakout and a breakdown remains technically viable, leaving the future direction of the GMX price uncertain.
GMX Price Prediction: Is a Breakout on the Cards?
The daily GMX price chart remains neutral, but a closer look at the wave count reveals a bullish setup, hinting at a potential breakout.
Specifically, GMX has completed a five-wave downtrend (black) from its June highs and has since initiated a five-wave uptrend (white) from its all-time low. Based on this pattern, a plausible target for the fifth wave’s peak is $37, which coincides with the 0.618 Fibonacci retracement resistance level.
Given that the current upward movement is unfolding in five waves, it’s likely to be either the initial wave A of an A-B-C correction or the first wave of a larger five-wave ascent (yellow).
In either scenario, while the $37 area could serve as a temporary resistance, it’s probable that the GMX price will ultimately break through and continue its ascent, reaching at least the $43 resistance level.
GMX Likely to Continue Increasing in August
The buyback proposal for GMX could positively affect the price, accentuated by the fact that a notable percentage of the GMX supply is illiquid. Additionally, the wave count predicts a breakout from the descending resistance trend line, triggering an upward movement toward $43.
