- Synthetix bulls pumped the SNX/USD pair up by 23% to $13.
- The release of SIP-181 documentation fuelling the rally.
- Also, praise from a blockchain influencer for the Synthetix Protocol supplying bullish headwinds.
- SNX/USD in overbought territory
JAIPUR (Coinchapter.com) – The release of SIP-181, a liquidity mechanism upgrade proposal for Synthetix, caused SNX to register 23% gains on Monday. The SNX/USD pair resumed its uptrend after an intermittent sideways trading phase. Prices rose from the local bottom near $10. But sellers sold the $13 top on overbought concerns.
Nonetheless, bulls jumped back in to save the day amid the long-term implications of SIP-181 for the Synthetix ecosystem.
Synthetix Improvement Proposal-181
Synthetix, Ethereum-based decentralized finance (DeFi) protocol, facilitates the issuance of “synthetic assets.” These synthetic assets a.k.a “Synths,” are essentially ERC-20 smart contracts that function like derivatives. They track the prices of different assets and generate returns without the user holding a particular investment.
The protocol’s native token, SNX, helps provide collateral against issued Synths. Bullish indicators for SNX flipped green when Synthetix developer Liam Zebedee announced the release of SIP-181 on Monday.
In detail, the latest SIP proposes “a synthetic pricing curve with parametric liquidity constants set to reflect the global liquidity available for each synth’s underlying asset.”
While describing the motivation behind SIP-181, Zebedee observed that trades on the DeFi derivatives platform execute concerning prices published by oracles. Oracles are blockchain-based data feed services that provide external data to decentralized apps (dapps).
“This opens up a number of vulnerabilities that make it difficult to scale the diversity and supply of synths.”wrote Zebedee in the proposal
SIP-181 can eliminate these vulnerabilities with a “pricing function that levies an additional price impact premium based on the size of an order.”
Zebedee also added that the said pricing function would “replicate global liquidity available for each synth’s underlying asset.” As a result, users would stand to avail “the best price execution and liquidity on Synthetix.”
While SIP-181 galvanized bulls to go long on SNX, appreciation for synthetic token issuance and its long-term impact on Defi markets strengthened the bullish momentum.
Praise From Noted Blockchain Influencer
Self-proclaimed blockchain investor, influencer, and advisor Oliver Isaacs praised the role of synthetic assets in DeFi markets. He also observed that despite low market share, the future potential of synthetic assets is “still great.”
“The potential of #Synthetic on #Defi is still great when the trading volume of synth assets accounts for only 4.6% of the total #Defi market volume.”said Isaacs on his Twitter handle
Plus, he highlighted the synthetic token issuance functionality on Synthetix and a similar project called Mirror Protocol.
Bullish daytraders bought Oliver’s endorsement of Synthetix en-masse and still have their grip firm on SNX markets. However, the explosive buying pressure pushed the token into the overbought zone.
SNX/USD Technical Setup
The recent SNX/USD rally led the pair to clock a relative strength index reading (RSI) of 70. While the figure represents the higher bound of the RSI range, it still falls effectively in the overbought zone, an invitation for sellers. As opposed to this, RSI numbers below 50 are considered bullish.
Nonetheless, buying force appears persistent amid a double bottom technical setup formed with SNX’s recent rise to $13. As a result, bulls managed to invalidate the SNX/USD pair’s bearish symmetrical triangle setup and look to continue the current price action.
Based on the Fibonacci plot setup, the next target for bulls falls at $16.65. A close above $14.3 would increase the likelihood of achieving the said price. But if bears manage to take back control, SNX prices could drop down to $11.78 or below.