Tron (TRX) has experienced a strong price rise, reaching a 5-month high. However, the recent bullish momentum appears to be losing steam, signaling the potential for a price correction.
While the asset has performed well, there are signs that TRX could be overvalued in the short term, which may prompt a pullback.
The Network Value to Transactions (NVT) ratio for Tron has spiked, reaching its highest level in a month and a half. NVT measures the ratio between a network’s market value and its transaction volume.
A rising NVT often signals that the market value of an asset is outpacing its transactional activity, suggesting overvaluation. In the case of TRX, this increase in NVT is a potential red flag.
With the NVT ratio rising, TRX could face downward pressure as investors adjust their expectations. The token’s overvaluation could lead to a sell-off, especially if market sentiment shifts toward caution.
As a result, a price correction seems likely, especially if the broader cryptocurrency market experiences a cooling-off period.
Despite the concerns about overvaluation, the overall macro momentum for TRX may not lead to a sharp correction. The IntoTheBlock’s IOMAP indicator shows a strong demand zone between $0.268 and $0.276, where around 13.89 billion TRX, worth nearly $4 billion, was purchased.
This substantial accumulation zone provides a buffer for TRX, as investors who buy at these levels are unlikely to sell without a profit.
The demand zone is crucial because it represents a price floor that may prevent TRX from falling too far. As the market has demonstrated interest in this price range, the chances of TRX dropping below $0.276 in the short term are reduced.
If TRX does experience a correction, it is expected to find solid support within this zone, keeping the price above the critical $0.276 level.
TRX has gained 7.45% over the past week, trading at $0.285 at the time of writing. It is currently facing resistance at $0.286, which has proven to be a challenging level to break. Given the recent rise in price, the token is nearing a critical point.
If TRX fails to breach the $0.286 resistance, it could face a pullback as investors take profits.
Should the overvalued condition trigger a price decline, TRX could drop below $0.282 and head toward the $0.275 support level. A fall below this level is unlikely due to the strong demand zone around $0.268 to $0.276, which should provide support for the price. The correction is expected to be moderate, with the demand zone preventing a more severe decline.
On the other hand, if the broader market remains bullish, TRX may push past the $0.286 resistance level. A successful breach of this barrier could see TRX move toward $0.290. This would invalidate the bearish outlook and set the stage for further price appreciation.
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