Key Takeaways:
- Linear Finance plans to decrease the platform's P-ratio to increase ℓUSD circulation.
- LINA price spiked by 105% on Feb 21 before paring gains.
NEW DELHI (CoinChapter.com) — Linear Finance, a cross-chain compatible for minting and trading synthetic assets, proposed a change in its ℓUSD minting mechanism. Likely responding to the news, the platform’s native token LINA blew up by nearly 105% on Feb 21 before paring gains.
The Linear DAO proposed to reduce the P-ratio from 450 to 400. In detail, the P-ratio, or the pledge ratio, is the platform’s collateralization ratio. So, for example, to build ℓUSD on the platform, users need to deposit LINA into the platform’s debt pools.
The P-ratio determines the amount of ℓUSD that users can borrow. Moreover, users can claim rewards and unlock collateral if they maintain a pre-determined P-ratio. The DAO determines the ratio by dividing the current market value of a user’s staked and locked LINA by the current value of the user’s debts.
A P-ratio of 400 means that for every $100 worth of LINA a user stakes, they can build $25 worth of ℓUSD. Furthermore, allowing Linear Finance users to claim rewards and build ℓUSD at a lower P-ratio would increase the amount of ℓUSD in circulation.
Also Read: 3 Reasons Why Bitcoin Price Could Breakout Above $25K
ℓUSD is a synthetic stablecoin that traders use to purchase synthetic assets on the project’s internal exchange.
Meanwhile, Linear Finance forum members welcomed the proposal. User semi1993 praised the DAO on the timing of the announcement. Another user supported the proposal, stating it seemed “like a sensible move.”
However, some users shared some concerns, with one user asking for the statistical details on which the DAO had based its proposal. A forum member also highlighted ℓUSD’s poor liquidity issues.
LINA Price Faces Intense Selling Pressure
On Feb 21, the LINA token price reached a multi-month high of $0.0178 after spiking 105%. However, strong selling pressure from the bears resulted in the Linear Finance token shedding most of the day’s gains.
The sell-off continued on Feb 22, with bears seeming determined to stop LINA price flipping immediate resistance. But, long wicks on both ends of the day’s candle indicate bulls are fighting back against the increasing bearish pressure.
Furthermore, LINA’s recent price action has left its 20-day EMA (red wave) poised to move above the token’s 200-day EMA (green wave) and form a golden cross. In detail, traders consider the bullish pattern an indicator of positive market sentiment and a buy signal.
If LINA forms the golden cross, buyers might enter the market and push LINA’s price to resistance near $0.0139. Moreover, a break and hold above immediate resistance might help the Linear Finance token price challenge resistance near $0.0163 before paring gains.
The relative strength index of LINA is currently overbought, clocking at 81.1 on the daily chart. Overbought RSI levels have traditionally been a sell signal for traders, as they often precede a bearish trend reversal.
Should the uptrend fail, LINA’s price might drop to support near $0.0118. Moreover, breaching the immediate support could result in the Linear Finance coin price falling 17.5% to reach $0.0103 before recovering.
