Synthetix announced the launch of Layer 2 platform on July 10.
The DeFi protocol’s token SNX surged by almost 25% from Sunday’s open of $11.040.
The token is performing better than a majority of its peers, including the top 30 cryptos by market cap.
NEW DELHI (CoinChapter.com) — Synthetix, a decentralized synthetic asset protocol, announced the launch of its Layer 2 exchange platform, powered by Optimistic Ethereum. That prompted bulls to propel the project’s native token SNX upwards by 24.64% from its Sunday low, insofar that it reached a high of $13.88 on July 12.
Why The Glass Is Half Full
Synthetix said the launch was a result of a collaboration between Chainlink and Optimism. Optimism is an Ethereum scaling platform that uses optimistic rollups, which help achieve lower fees and better throughput. In optimistic rollups, the consensus mechanism is not dependent on verifying each transaction. Instead, the network assumes all transactions to be correct unless users identify an incorrect transaction and submit proof of fraud.
As per the announcement, the DeFi protocol plans to activate exchanges on Optimistic Ethereum (L2 scaling solution) in the week of July 26. However, final deployment depends on approval by the Spartan Council.
The term synthetic assets define a type of asset which functions as a tokenized derivative that mimics the value of another asset. For example, cryptocurrency-based synthetic assets, or Synths, provide users exposure to various assets without requiring them to hold the underlying assets. In addition, Synths track the value of assets using data feeds, which helps users experience gains or losses in the market.
For now, the Synths supported by the Optimistic Ethereum mainnet are sETH, sBTC, and sLINK. After deploying the initial group of Synths, Synthetix plans to expand the number of Synths and functionalities to include a wider range of assets.
Synthetix generates new assets using a process called Collateralization. For collateralizing on Synthetix, users must purchase SNX and lock it in a special contract.
Kain Warwick, the Synthetix founder, said he believes the transition to Optimistic Ethereum is one of the most critical milestones in the project’s history.
At the time of writing, Synthetix is in the top 10 DeFi projects by most value-locked, with $1.43 billion worth of SNX locked in its projects.
SNX Price Charts Are Optimistic
When news of the launch became public, SNX prices started rocketing. On July 11, the token registered a gain of 12.74% between open and close levels. The bulls continued this rally on Monday, with the token’s prices still going upwards.
SNX prices have been trading above the 50-Day (Blue) Moving Average trend line, which indicates the token to be bullish in the short term. The trend line also forms a confluence with the 20-Day Exponential MA, showing support at the $9.78 price level if the rally breaks down.
Additionally, SNX prices are below the 100-Day (Red) and 200-Day (Green) MA trend lines. As such, the token seems to bearish in the mid and long-term. However, the 100-Day MA level lies very close to the token’s resistance at $13.44. Thus, SNX appears to be moving upwards towards the 100-Day trendline. If the DeFi token breaches its immediate resistance, the next one lies at $14.75.
MACD, a momentum oscillator, is also bullish for SNX. The MACD line (12-Day and 26-Day EMA difference on daily chart) moves above the indicator’s signal line (9-Day EMA of MACD), indicating bullish momentum for the token. In addition, the MACD histogram, which plots the difference between MACD and its signal line, is above zero, further supporting the bullish outlook.
The relative strength index for SNX is 66.71, which is still neutral. However, the RSI line is moving upwards, which might place the token in the overbought/overvalued terrain soon. If it happens, SNX might face a trend reversal.
The SNX/BTC pair is gaining, indicating that the DeFi token performs better than the flagship crypto. SNX gained 21.12% from July 11’s open of 0.0003294 BTC to July 12’s high of 0.0003990 BTC. Meanwhile, BTC prices have struggled to break through the $34,000 resistance level. SNXBTC pair’s MACD indicator also forecasts a bullish outlook. However, RSI for the pair has moved in the overbought level with a value of 72.49.
The Optimism launch is the core fundamental behind SNX’s recent price rally. Thus, it will need more support from bulls to continue its upward momentum.
At the time of writing, SNX was trading at $13.172 per token, up 5.93% on the day.
A Delhi-based Markets writer, I did my bachelor's in engineering with major in electronics and communications. I first heard of bitcoin while writing an article about blockchain technology a few years back, and have been following it ever since. Bitcoin may well be current big thing happening in the finance industry, and it feels like the right time to join the crypto bandwagon.