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Pyth Network Price Breaks out From Wedge – PYTH Can Confirm Reversal With Increase Above $0.53

Last Updated June 7, 2024 2:48 PM
Valdrin Tahiri
Last Updated June 7, 2024 2:48 PM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • PYTH has broken out from a descending wedge pattern, but still trades below the $0.53 resistance.
  • The PYTH price has corrected under a descending resistance trend line since its all-time high in March.
  • Is the PYTH price correction finally over, or will PYTH fail to reclaim the $0.53 horizontal area?

The PYTH price has corrected by nearly 70% since its all-time high price of $1.15 on March 16. The May token unlock exacerbated the decrease, but the price began an upward movement shortly afterward.

After the breakout, PYTH needs to reclaim the $0.53 horizontal resistance area to confirm its bullish trend reversal. Will it do so, or is another rejection likely instead?

PYTH Breaks Out From Wedge – Correction Could be Over

The PYTH price has fallen under a descending resistance trend line since its all-time high in March. The decrease culminated with a low of $0.35 on May 20. However, the price began an upward movement the same day, creating a large bullish engulfing candlestick.

As a result, PYTH broke out from a descending wedge pattern. Because of the prevailing wave count, the wedge was likely part of an ending diagonal.

Despite the breakout, PYTH has yet to reclaim the $0.53 horizontal resistance area and break out from its descending resistance trend line.

Wedge Breakout
PYTH/USDT Daily Chart | Credit: TradingVIew

Nevertheless, the MACD and RSI are both trending upward. The MACD generated bullish divergence and has nearly moved above 0, while the RSI has already increased above 50.

As a result, a breakout and increase toward the next resistance at $0.76 is the most likely future price outlook. Conversely, a rejection from the trend line can cause a retest of the May lows of $0.35.

Massive PYTH Token Unlock

Pyth Network has a maximum supply of 10 billion tokens. Until last week, only 1.5 billion of them were in circulation. However, this changed with a massive token unlock of 2.13 billion PYTH  on May 20. AT the current price, they are worth over $800 million, and they increase the circulating supply by over 140%.

This is the final token unlock until May 19, 2025, when another token unlock of the same amount will transpire. Then, until the maximum supply is reached, two more such unlocks are scheduled for May 2026 and 2027.

PYTH Token Unlock
PYTH Vesting Schedule | Credit: TokenUnlock

May has been a month with numerous large token unlocks. The biggest unlock was for AEVO, where the circulating supply increased by 750%.

Even in significant token unlocks, there is an interesting pattern in which the price falls before the unlock, as users are anticipating the dilution in supply. However, after the unlock is complete, the largest part of the price decrease is already over.

So far, this has happened with AEVO, which corrected notable until the day of the token unlock but has stabilized since. Large token unlocks of over 10% led to the same patterns in DYDX and SUI.

On the other hand, token unlocks of less than 10% like AVAX, ARB and APT did not lead to a change in price. The lack of effect was also visible in IMX and APE. AVAX will unlock another 2.5% of the circulating supply on May 21. If the previous pattern holds, the price will remain unaffected.

May Token Unlocks
Custom Daily Chart | Credit: TradingView

So, in May, token unlocks of larger than 10% have led to a price decrease before the unlock and stabilization after. The decrease was more prevalent the larger the unlock. Token unlocks of less than 10% of the circulating supply have had no noticeable effect on the price of an asset.

PYTH Price Falls to New Lows

The daily time frame chart shows that PYTH has fallen since reaching its yearly high of $1.16 on March 16. The decrease culminated with a low of $0.35 on May 20, which is the lowest price since January 28.

The PYTH price decrease was contained inside a descending resistance trend line and also caused a breakdown from the $0.50 horizontal area. The latter is critical since it acted as the original all-time high resistance and was expected to provide support afterward. This was not the case.

PYTH Price Decline
PYTH/USDT Daily Chart | Credit: TradingView

Technical indicators are showing some bullish signs but nothing that confirms the possibility of a reversal. While the RSI fell into oversold territory and generated a potential bullish divergence, it has not confirmed it yet. The MACD has also generated an unconfirmed bullish divergence (green).

As a result, we need to look at a lower time frame to determine the future trend’s direction.

PYTH Price Prediction: Five-Wave Decline Complete?

The six-hour chart shows that PYTH has completed a five-wave downward movement since April 22. As evidenced in the first section, this pattern has been common, where there is a significant decline leading up to the token unlock. It is likely the main reason why the PYTH price has underperformed that of its Solana contemporaries, JUP and JTO.

The decline has been contained inside a descending wedge, which is considered a bullish pattern. This means an eventual breakout from the wedge is probable. The bullish divergences in the MACD and RSI support this.

If the breakout happens, PYTH can increase to the 0.5 Fibonacci retracement resistance level at $0.53. The level is close to the previously outlined long-term horizontal resistance area.

PYTH Price Wedge Decrease
PYTH/USDT Six-Hour Chart | Credit: TradingView

Then, whether the PYTH price breaks out or not will determine the future trend’s direction. Despite this bullish short-term outlook, breaking down from the wedge can trigger a decline to the yearly low at $0.30.

The Worst May Be Over

Despite the notable PYTH price correction that led to new lows, there are multiple bullish signs pointing to an imminent turnaround. These are visible in technical readings and the pattern of previous token unlocks in May. The breakout from the wedge is a sign the correction has ended. This will be confirmed with a close above $0.53.

Disclaimer
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
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