Anchor Protocol Rebounds Strongly After Plunging 70% In Just Two Months – What’s Next For ANC?

Anchor Protocol (ANC) returned to its bullish form this May after falling over 70% in the previous two months.

pullback risks ahead

The price of ANC rallied a little over 42.50% between May 1st and May 6th to hit a three-week high of $2.26. Nonetheless, the token saw a sell-off on May 6th and 7th after ramming into what appeared to be a confluence of resistance.

This consists of a 50-day exponential moving average (50-day EMA; the red wave) and a 0.786 Fib line of the Fibonacci retracement chart drawn from the $1.32 swing low to the 5th day $.82 swing high as shown in the chart below.

ANC/USD daily chart. Source: TradingView

A sustained pullback move could see ANC’s price fall towards its rising trendline support, coinciding with the bottom near $1.67, which preceded a 175% price rally between February 20th and March 5th.

Meanwhile, a decisive break below the trend line would risk ANC crashing towards the 1.00 Fib line near $1.32, almost 30% below today’s price of $1.92.

Conversely, the ANC’s Relative Strength Index (RSI) daily readings have risen from below 30 (oversold) to around 50 over the past seven days, indicating upside strength in the anchor market unless readings surpass 70, the overbought threshold .

As a result of the favorable RSI, the anchor protocol token has the potential to break the confluence of resistance around $2.28, with its next upside target lurking around the 0.618 Fib line near $3.

Anchor log TVL hits record high

The sharp upward retracement in the Anchor Protocol market also coincides with a continued flow of capital into its liquidity pools.

In detail, the total value (TVL) in Anchor’s savings and lending pools rose to $16.48 billion on May 7 from $8.6 billion earlier this year — a nearly 100% increase. In the process, Anchor’s reserves hit a record high of $17.15 billion on May 5, data from DeFi Llama shows.

Anchor Protocol TVL. Source: DeFi Llama

Users continued to commit funds to the Anchor Protocol, mainly due to the higher annualized return of 19.5%. This makes it the largest pool of liquidity within the Terra (LUNA) blockchain ecosystem.

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Anchor has also expanded its services to Avalanche (AVAX), another base-layer blockchain, and now plans to operate on the Polkadot (DOT) ledger.

ANC is a governance token within the Anchor Protocol’s “decentralized money market” ecosystem. It also offers holders a percentage of the log earnings. Therefore, Anchor Portocol’s expansion into other blockchain ecosystems promises to generate more demand for ANC.

Additionally, proposals such as the ANC with voting rights, allowing holders to lock their tokens for a preset period of time in exchange for better voting rights and staking rewards, could also boost demand from ANC.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.

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