Nov 17, 2024

6thTrade

Raydium (RAY) experienced a remarkable rally, surging by 280% between October 10 and November 9. However, this impressive growth has faced a pullback, with market indicators suggesting the token may be overextended in the short term. The Automated Market Maker (AMM) and liquidity provider, operating on the Solana (SOL) blockchain, has seen a dramatic increase in fees and revenue over the past month, fueling its price momentum.

Fees and Revenue Spike for Raydium

Data from DeFiLlama shows that on October 21, Raydium recorded daily fees of $3.4 million, surpassing Ethereum’s $3.35 million for the same day. This surge contrasts sharply with Ethereum’s steady decline in fees following its Dencun upgrade in March.

In September, Raydium’s fees hovered around $300,000 daily. By November 13, fees had skyrocketed to $10.73 million, with revenue reaching $693,360. These fees, collected from token swaps, partially fund the market purchase of RAY tokens, which are then distributed to token stakers.

This rapid revenue growth is attributed to the rising popularity of memecoins on the Solana network, driving demand for SOL and increasing fees for Raydium. As demand soared, RAY prices followed suit.

Overextension and Potential Correction

Despite its meteoric rise, market indicators hint that RAY may be due for a correction. AMBCrypto’s analysis shows that the 30-day Market Value to Realized Value (MVRV) ratio reached 26.37% and hit a local high of 67.3% on November 9. This suggests substantial profit-taking activity, as reflected in a spike in dormant circulation, signaling heightened token movement.

The Mean Coin Age (MCA), which had been declining since September, showed signs of recovery recently. However, it has not yet indicated significant accumulation, suggesting that profit-taking could continue to weigh on RAY’s price.

Technical Indicators and Price Outlook

Raydium’s price charts reveal bullish technical indicators, despite signs of short-term pressure. After facing rejection at $6, the Relative Strength Index (RSI) fell from 83.66 to a still-bullish 62.3. The On-Balance Volume (OBV) remains in an uptrend, pointing to sustained buying pressure, while trading volumes have increased consistently over the past month.

Fibonacci retracement levels highlight the $3.78 and $3.26 levels as key areas of interest for potential price support. In the immediate term, the $4 level could act as a critical threshold. A dip below this level may signal that bearish momentum is intensifying, potentially driving RAY towards a deeper correction.

Conclusion

Raydium’s meteoric rise underscores the growing influence of Solana-based assets and the increased demand for decentralized finance solutions. However, with signs of market overextension and profit-taking activity, caution may be warranted in the short term. Investors should closely monitor key support levels and market indicators to assess the next phase of Raydium’s price action.