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Injective 3.0 Announced but 600-Day INJ Price Rally May Have Already Ended

Published April 16, 2024 8:58 AM
Valdrin Tahiri
Published April 16, 2024 8:58 AM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • Injective announced the proposal for INJ 3.0 on April 15.
  • The INJ price has fallen over 50% since its high on March 14.
  • Will the release of INJ 3.0 have a positive effect on the INJ price?

Injective announced the governance proposal to the biggest upgrade to its tokenomics yet in the form of INJ 3.0, aiming to make INJ a deflationary asset.

The proposal comes at a much-needed time for INJ, whose price has been freefalling since reaching its all-time high on March 14. The price bounced on April 13, but it is not certain if the bounce marked the absolute bottom.

What is INJ 3.0?

Injective has grown considerably since its inception. It currently ranks as the #45 biggest cryptocurrency ranked by its market capitalization. Its native token INJ is mainly used for staking and governance.

Initially, in order to keep the INJ supply in check, weekly token burn auctions commenced. This was part of what is known as INJ 1.0. In August 2023, the protocol established a more extensive token burn auction, where decentralized applications (dApps) contributed to the burns. This was called INJ 2.0. 

Besides dapps, a significant portion of the burn resulted by Non-Fungible Tokens (NFTs). With the launch of NFTs  on the Injective ecosystem, a portion of the tokens required to mint NFTs were burned, contributing to the reduction in the INJ inflation.

Until now, almost 5.9 million INJ tokens have been burned. The maximum supply for INJ is set at 100 million, while the circulating supply  is at 90 million.

INJ 3.0 will further tackle the issue of inflation. The proposal  aims to decrease the on-chain parameters for minting new INJ.

The lower bound inflation rate is currently at 5% and will decrease to 4% in two years, while the upper bound is at 10% and will fall to 7% in two years. The upgrade drew inspiration by Bitcoin and its reduction in inflation after each halving.

The timeline for INJ 3.0 is as follows: After the governance forum discussion, the proposal voting will begin on April 19, with the final governance result being on April 22. If the proposal passes, INJ 3.0 will launch on the mainnet.

To conclude, the proposal aims to optimize tokenomics, ensure sustainability, and enhance emissions responsiveness to staking activity. It comes at an optimal time for INJ, whose price desperately needs a positive catalyst, having fallen over 50% last week alone.

Has the Long-Term Bullish Trend Ended?

The INJ price has been one of the best performers in the current bullish cycle. The price began a five-wave upward movement in May 2022, culminating with a new all-time high price of $53 on March 14, 2024. This was an increase of 4,500% in nearly 640 days.

However, INJ has fallen since,decreasing by 65% before an ongoing bounce.

INJ Price Long-Term Trend Over
INJ/USDT Weekly Chart: Credit: TradingView

A bearish divergence in the weekly RSI and MACD (green) preceded the decrease. Since the divergence occurs in the weekly time frame, it is a compelling sign that the upward trend has ended.

After the divergence, the RSI fell below 50 while the MACD made a bearish cross (red icon). Nevertheless, the INJ price started a bounce in the short-term.

INJ Price Prediction: Short-Term Bounce

The 3-day time frame shows that the INJ bounce happened exactly at the 0.618 Fib retracement support level and the previous all-time high resistance of $21. It created a very long lower wick, considered a sign of buying pressure.

While the depth of the correction is admissible, the decrease has been too short relative to the preceding upward movement. The decrease lasted for only 33 days compared to the nearly 640 for the upward trend.

INJ Price Correction Continues
INJ/USDT 3-Day Chart | Credit: TradingView

As a result, it is likely that it is only the first part of a larger correction, labeled as an A-B-C structure.

Using a Fib tool on the previous upward trend, it is possible the correction will continue until November 2024, with the price consolidating between the $21 level and the $53 all-time high.

INJ 3.0 an Encouraging Development but Correction Under Way

While the proposal for INJ 3.0 can have positive benefits for the long-term price due to its deflationary mechanism, the INJ price is likely mired in a long-term correction as a result of its nearly 640-day upward trend. A consolidation period that continues until nearly the end of the year might be in store.

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