Lido DAO (LDO) risks a selloff after a 400% monthly rally.

YEREVAN (CoinChapter.com) – Lido DAO, the leading Ethereum staking service provider, rallied over 100% since July 27, bringing monthly gains to 400%. However, the surge cooled off in the New York session hours on July 28, dropping the LDO token to $2.3, a 13% decline from the local high of $2.6.

Additionally, the digital asset’s low time-frame chart hinted at a selloff continuation.

LDO selloff risks intensify.

As mentioned, Lido DAO’s token doubled its price in two days. Moreover, it broke out of a bullish Pennant, a continuation pattern that forecasts a strong bullish move after an asset breaks above the formation’s resistance.

Notably, LDO broke below the support but confirmed the pattern all the same and shot beyond the setup’s estimates. However, the declining trading volumes on the detailed two-hour chart suggest a lowering interest among traders, as they don’t expect the asset to offer more gains. The divergence points to a continuation of the correction.

Also read: Ethereum Classic (ETC) pumps 45% in three days on Merge FOMO — will the rally continue?

Additionally, LDO’s relative strength index (RSI) also charted through ‘overbought’ territory since July 27, hinting at a looming reversal.

In short, traders use the RSI as a gouge of token price evaluation. When the oscillator drops below 30, a bullish reversal could be expected. Conversely, when the RSI shoots above 70, many traders could consider the asset overbought and pull their bets.

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Meanwhile, Ethereum Merge played a significant role in Lido DAO’s rally.

Why did Lido surge?

Lido DAO allows liquid staking of Ethereum tokens ahead of the Merge, which doesn’t require locking assets. The platform allows stakers to get tradable stETH in exchange for every Ether (ETH) staked and avoid coin locking.

The advantage allowed Lido DAO to attract a large number of investors. Given the upcoming Merge on Sep. 19, the protocol could benefit further and rally again.

Also read: El Salvador to buy back $1.6B in sovereign bonds amid speculations of default.

In late June, Lido DAO initiated a vote to limit ETH staking on the platform. But despite concerns about too much centralization of Ethereum 2.0 staking, the majority of LDO holders voted against limiting it.