You may have already heard of dYdX, a decentralized crypto exchange built on the Ethereum network. A decentralized exchange is one which allows anyone to invest and trade in cryptocurrencies without having to go through the traditional KYC (Know Your Customer) process. Offering users more privacy, they can trade without declaring their identity by simply connecting a decentralized wallet like Metamask to the exchange.
Decentralized exchanges especially hold a lot of potential for crypto investors and traders living in countries which have either banned crypto or made it difficult to invest in, such as China, India and Turkey, to name a few.
The dYdX token (DXDY) launched in September, 2021, and its token quickly rose to a high of around $28 before retracing 80% to its current value of about $6.20. The price has consolidated for almost a month at these levels, indicating that price has potentially bottomed.
By taking a look at the daily chart (attached), you can see that the price is finally on the verge of breaking the very long downward trend line from September 21st. However, what makes this token particularly interesting – and the reason why we chose it as our chart of the day – is the extreme bullish divergence on the daily RSI (Relative Strength Indicator), an indicator we recently explained in this article.
To recap, the RSI indicator is known as a leading indicator, meaning that it potentially shows where the price may go. Bullish divergence is when the RSI points upwards, while the price is still not following the RSI trend. The divergence has been shown in orange on the chart attached.
This bullish divergence indicates that the price should break out soon. If the price breaks the trend line, and the bull market resumes, DYDX can easily make its way back to the $19 level, almost 200% up from here!
If all this “technical talk” is a bit too confusing, you can do Sheldon’s Master Classes on our YouTube channel, where Sheldon educates in a simple way. The link below will take you to the first lesson. These are short 10 to 15 min videos helping to explain technical analysis in a simple manner. There is one particular master class dedicated explicitly to the RSI (Relative Strength Indicator).