Home / Analysis / Crypto / Technical Analysis / PENDLE Price Jumps 20% After EigenLayer Controversy Clarification – Reversal Still Pending

PENDLE Price Jumps 20% After EigenLayer Controversy Clarification – Reversal Still Pending

Last Updated May 8, 2024 12:36 PM
Valdrin Tahiri
Last Updated May 8, 2024 12:36 PM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • PENDLE has fallen under a descending resistance trend line since its all-time high on April 11.
  • After the decrease, PENDLE bounced nearly 20% after its May 1 bottom of $4.03.
  • Has the PENDLE price completed its correction, or is more downside likely in the future?

After a 45% decline in a little more than a week, the PENDLE price regained its footing on May 1 and has increased since. The bounce coincided with a clarification of EigenLayer’s controversial airdrop allocation regarding Pendle users.

Despite its recovery, PENDLE trades below its main horizontal and diagonal resistance levels. Can PENDLE move above them, or is more downside likely before an eventual reversal?

PENDLE Bounces – Is the Correction Over?

The PENDLE bounce led to a high of $5.41 on May 6. This validated the $5.50 horizontal area as resistance (red icon). The area had acted as support before the April 29 breakdown.

Another important observation is that PENDLE still trades below its descending resistance trend line. The trend line has existed since the all-time high, so the trend is considered bearish until the price breaks out.

Ongoing Bounce
PENDLE/USDT Daily Chart | Credit: TradingView

So, despite the bounce, PENDLE has yet to break out from its diagonal or horizontal resistance.  On top of this, the RSI and MACD are still below their bullish thresholds. While both are increasing, the RSI remains under 50 and the MACD is below 0.

Wave Count Predicts Breakout

While the price has not broken out yet, the wave count suggests it will. After a 238-day five-wave increase (white), PENDLE completed a sharp correction that took it to the 0.5 Fibonacci retracement support level.

While this is a suitable depth for the correction, the decrease has been short relative to the upward movement. So, it is possible it is only the first part in an extended corrective structure. If so, PENDLE has begun wave B, which can take it toward the next resistance at $6.75.

Long-Term Wave Count
PENDLE/USDT Daily Chart | Credit: TradingView

The sub-wave count corresponds with this possibility, confirming the first portion of the decrease is over. The shape of the ensuing bounce is also impulsive, aligning with the prospect of a continued increase.

If PENDLE breaks out, an upward movement toward $6.75 is plausible, with minor resistance between $5.75 and $6.17.

Short-Term Correction
PENDLE/USDT Six-Hour Chart | Credit: TradingView

It is important to note that this is expected to be a relief rally with respect to the long-term correction. So, another downward movement is likely in the future.

PENDLE Price Falls 45% After Unsatisfactory EigenLayer Airdrop Allocation – Concerns Appear Unfounded

EigenLayer is an Ethereum liquid restaking protocol that has a Total Value Locked (TVL) of over $14.80 billion. Its launch in June 2023 triggered a sharp increase in the number of staked Ethereum. The much-anticipated release of its native token sparked controversy relating to its allocation. This was especially pronounced in Pendle, a yield trading protocol that has been one of the biggest gainers in 2024.

The PENDLE price has been on a freefall since the news came out, falling to the lowest price since March. After a 45% drop since its all-time high, the question arises if the PENDLE price will reach a temporary bottom soon, or if there is no end in sight to the decrease.

What’s the EigenLayer Controversy?

While no native EigenLayer token exists yet, the team behind EigenLayer announced  the EIGEN token on April 29, which will be distributed through an airdrop known as the “Stakedrop.” They took a snapshot on March 15, and phase one of the Stakedrop will grant tokens to restakers and Liquid Staking Token (LST) holders.

The EIGEN token has a total supply of 1,673,646,668 tokens, with 5% of this supply allocated in Season 1, amounting to 83 million tokens. In total, the ecosystem will distribute 15% of the supply to participants over several seasons.

The allocation drew the ire of stakers, who believe the allocation to them in Season 1 is minuscule compared to that of the team and investors. Also, the fact that it is not available in certain countries and that the tokens will initially be untransferable is not a welcome development.

The stakedrop has two phases. In season 1, 90% of the airdrop will allocate to individual users who have interacted with the EigenLayer protocol. The remaining 10% will distribute to those who have engaged in more complex interactions with the protocol, often through DeFi contracts.

More specifically, this phase includes users and contracts that had Liquid Restaking Tokens (LRT) split into multiple assets. Since Pendle splits its liquid staking into two assets, the principal and the yield tokens, it falls into this category. Through Pendle, users could use a LRT to earn points for both the Eigenlayer drop and the LRT protocol.

How Does it Relate to Pendle?

The community perceived the news negatively because they considered the allocation of phase two insufficient for points farmers in Pendle and similar protocols, resulting in an over 45% decrease in the PENDLE price. However, upon closer examination, these concerns seem unwarranted.

Both the Pendle and Eigen teams  have clarified that the allocations were not predetermined. Rather, they reflected the aggregate allocation. In simple terms, this means that out of all the users that interacted with the EigenLayer protocol, 90% did it through the protocol itself, and 10% did through DeFi contracts, hence the 90-10% allocation.

The sole reason for the two-phase allocation instead of one is the difficulty in easily identifying users who interacted through DeFi contracts.

To quote the Eigen Foundation:

“10% of Season 1 could not be readily identified because eligible recipients engaged in complex interactions with contracts that made identifying the appropriate end user challenging or opinionated.”

Hence, with a portion of these tokens reserved for LRT protocols, their teams (in this case PENDLE) will submit a list of addresses and then proceed to allocate the compensation.

With these clarifications, it seems the negativity and in turn 45% decrease surrounding PENDLE is unfounded. Pendle Volume

PENDLE Volume | Credit: DeFiLlama

Also, Pendle’s Total Value Locked is not based in EigenLayer farming alone. It is currently at $4.20 billion, a slight drop from the $5.20 billion all-time high. It is the eighth biggest protocol on Ethereum based on its TVL.

Finally, it is worth noting that volume on Pendle  has not fallen at all. Rather, volume for April was at an all-time high of $5.20 billion.

How Much has PENDLE Fallen?

The daily time frame chart shows that PENDLE has fallen 44% since the all-time high price of $7.53 on April 11. The downward trend led to a low of $4.02 on May 1. The low coincides with the 0.5 Fibonacci retracement support level.

Since creating a lower high on April 23, PENDLE has fallen at an accelerated rate and is nowhere close to its descending resistance trend line.

PENDLE Price Decrease
PENDLE/USDT Daily Chart | Credit: TradingView

The daily RSI and MACD both show extremely interesting readings. At first glance, both are bearish, since they are trending downward. Also, the RSI is below 50 and the MACD has made a bearish cross (red circles).

However, the RSI is at its second lowest value ever. The lowest was in August 2023 (green circle), when the price fell to its all-time low. Moreover, the MACD is at an all-time low itself. These oversold levels highlight the decreases severity.

PENDLE Price Prediction: Is the Bottom Close?

The daily time frame wave count suggests that PENDLE is in the first portion of its correction. If the count is accurate, it will eventually lead to more downside. This is because the upward movement continued for 238 days, while the correction has been ongoing for only 21.

As a result, the decrease is likely wave A in an A-B-C corrective structure. Since the price has reached the 0.5 Fibonacci retracement support level, the first portion of the correction could be complete.

However, a closer look at the short-term movement is needed to determine the correct structure.

PENDLE Price Correction
PENDLE/USDT Daily Chart | Credit: TradingView

A closer look at the structure reveals that another decrease is likely before the A wave concludes. This is because the C wave is developing in a five-wave downward movement (white). If the count transpires as expected, PENDLE will rise toward $5, completing wave four, before another decrease to $3.15 marks an end to first phase of the correction. Then, PENDLE can begin the B wave.

PENDLE Short-Term Movement
PENDLE/USDT Six-Hour Chart | Credit: TradingView

Conversely, increasing above the wave one low (red) of $5.48 will mean that wave B is already underway. In both cases, it is likely that the long-term PENDLE correction is not over yet.

PENDLE Faces More Downside, EigenLayer Concerns Unwarranted

To conclude, Ill-founded concerns surround the EigenLayer airdrop, particularly regarding the allocation to Pendle points farmers. However, the PENDLE price is likely to remain entrenched in a long-term correction that may persist into May. A short-term bounce that completes wave B is probable.

Was this Article helpful? Yes No