Lido’s (LDO) 67% Rally Faces Reality Check as Euphoria Nears Peak

LDO, the native token of Ethereum’s largest decentralized staking platform, Lido, has surged 67% over the past week, earning the top spot among crypto gainers in the last seven days. 

However, both on-chain and technical data suggest this rally may be running out of steam as signs of buy-side exhaustion begin to surface. 

Warning Signs Flash for LDO

Per Santiment data, LDO’s weighted sentiment has rocketed to a nine-month high of 7.32. This places the metric in euphoric territory, a zone that historically has often preceded price pullbacks. This puts LDO at risk of shedding some of its recent gains. 

LDO Weighted Sentiment. Source: Santiment

An asset’s weighted sentiment measures its overall positive or negative bias, considering both the volume of social media mentions and the sentiment expressed in those mentions. When it is negative, it is a bearish signal, as investors are increasingly skeptical about the token’s near-term outlook. This prompts them to trade less, exacerbating the price decline. 

On the other hand, when its value is positive, traders are discussing the asset more with an overall bullish tone. 

When it continues to climb, as with LDO, while this can reflect strong confidence, such extreme optimism often signals that buyers may be overextended. Historically, spikes in weighted sentiment have marked the end of uptrends, as heightened optimism like this indicates that buyers may soon become exhausted, raising the risk of a reversal.

Furthermore, readings from LDO’s Relative Strength Index (RSI) on the daily chart support this bearish outlook. As of this writing, it sits at 76.52, an overbought territory. 

LDO RSI. Source: TradingView

The RSI indicator measures an asset’s overbought and oversold market conditions. It ranges between 0 and 100. Values above 70 suggest that the asset is overbought and due for a price decline, while values under 30 indicate that the asset is oversold and may witness a rebound.

LDO’s RSI readings indicate that the altcoin is now firmly in overbought territory, suggesting buying momentum may be unsustainably high. This raises the possibility of a price consolidation or a pullback as sellers look to lock in profits.

Buyer Fatigue Looms Over LDO

Once buyer exhaustion grows, LDO risks falling to $1.33. If the support floor fails to hold, the token could plummet further to $1.017.

LDO Price Analysis. Source: TradingView

However, LDO’s price could extend its rally and climb above $1.55 if buying pressure remains.