Key Takeaways:
- Injective token INJ could drop another 10% by week’s end.
- Technicals support the short-term bearish prognosis.
- INJ 2.0 introduced a new burning mechanism that could benefit the coin in the long haul.
YEREVAN (CoinChapter.com) — Injective token INJ declined 5% to $7.50 on Aug 21. But technical indicators pointed to another 10% slide before the week’s end on Aug 26.
While the price action has established higher lows since Feb 2023, the token’s relative strength index (RSI) printed lower lows, diverging from the price action. Such deviation is typically a ‘canary in the coalmine’ for a looming price reversal.
The trading volumes have also declined year-to-date, testifying to waning interest among traders. If a drop follows, a likely short-term target will stand at the $6.80 support line, a 10% value decline for INJ.
Moreover, the mentioned daily price decline was accompanied by a 12% rise in trading volumes, which means INJ holders were actively selling, possibly expecting more decline ahead. Meanwhile, their decision could reflect a “buy the rumor, sell the news” approach, as the dump began on Aug 18, after Injective protocol announced its INJ 2.0 Burn Upgrade.
Injective 2.0 Burn Upgrade is unlikely to help bulls
Injective Labs announced the news on Aug 16, claiming that the new token-burning mechanism is the largest tokenomics upgrade on the protocol, which could increase the weekly burn rate.
In detail, the protocol held a weekly burn event, during which every exchange dApp directed 60% of its transaction fees into a so-called “auction basket.” The community members then competed for the complete winnings of that week through their bids.
The payments made for the auction basket were then burned once the auction ended, decreasing the overall token supply. 5.7 million INJ were destroyed in the model mentioned above.
The upgrade to INJ 2.0 aims to enable any dApp on Injective to contribute to burn auctions, therefore extending the benefits of the token burn mechanism to a wider array of protocols.
read the announcement.
The upgrade will include more dApps in the basket. Moreover, all protocols can control their allocation amount, up to 100% of collected fees.
The burn upgrade could benefit the INJ coin in the long-haul, as shrinking supply typically end up pumping the price.
