Programmable blockchain Tron’s TRX token extended its recent rally on Wednesday, with technical charts signaling further bullishness in its immediate future. The broader crypto is mixed, with Terra’s LUNA Classic and Cardano’s ADA token among the top losers with 6.88% and 2.09% drops respectively.
At 08:36 EST, TRX changed hands at $0.0899 and topped the Forbes leaderboard with a 10.8% gain in 24 hours. The cryptocurrency jumped 29.3% in May, becoming the best performing coin with a market value of at least $1 billion even as bitcoin, the crypto market leader, fell 15%.
Looking ahead, TRX’s daily chart showed an impending golden cross, which occurs whenever an asset’s average price over the past 50 days rises above its 200-day average. The averages appear set to cross bullish before the weekend in a sign of strengthening bullish momentum.
TRX’s last golden cross happened on Sept. 13 last year, following which it gained 18% in three days. Further, the golden cross confirmed in June 2020 paved the way for a 10-month bull run that saw the cryptocurrency rally by a staggering 1214% to $0.184. The broader market saw a similar meteoric rise during that time frame, with bitcoin charting a 10-fold rally to $64,000.
While golden crossovers are widely taken as bullish signals, they are based on past data or backward-looking moving averages. In other words, the actual crossover results from a notable price rally. Therefore, seasoned traders consider moving average crossovers as lagging indicators and unreliable as standalone metrics.
The odds of TRX charting another 2020-like rally after the confirmation of the golden cross appear low, thanks to the Federal Reserve’s monetary tightening plans and the resulting broader market lull. That said, TRX could see moderate post-golden crossover gains like September last year as Tron’s ecosystem is booming due to its recently launched algorithmic stablecoin USDD, which is almost a carbon copy of Terra’s failed TerraUSD (UST) stablecoin.
The USDD’s market cap has jumped above $600 million in less than a month from its launch on May 5. The double-digit returns promised on USDD deposits in Tron-based DeFi protocols seem to be driving demand for the TRX-backed stablecoin. According to DefiLlama, the total value locked (TVL) in Tron-based DeFi protocols currently stands at $6.3 billion, up 44% over the past month. The return on USDD deposits on JustLend, a Tron-native lending platform, is currently 23%. Meanwhile, depositors can earn more than 50% on the stablecoin platform SUN.
The investor behavior appears irrational, given the super-high yields are unsustainable and could eventually lead to a bank run, as highlighted by the crash of Terra’s UST stablecoin last month.
The jury is out on whether USDD will meet the same fate as UST. For now, TRX holders have a reason to cheer. However, that’s not the case for ADA bulls, as the token is yet to clear its downward sloping or bearish 50-day moving average.
Cardano’s ADA token has risen 40% in four days. However, with the 50-, 100- and 200-day averages stacked one above the other, the momentum remains bearish.
A convincing move above the 50-day average, currently at $0.758, would imply an interim bottom has been made.