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As Curve DAO Token (CRV) price soars, beware of a dead cat bounce

By:
on Aug 2, 2023
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  • Curve DAO has been under pressure this week after a major exploit.
  • The exploit saw the hackers drain over $100 million worth of tokens.
  • The rebound could be a dead cat bounce, which happens after a major dip.

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Curve DAO token (CRV) price bounced back in the overnight session even as concerns about the DeFi network continued. The token rose to a high of $0.60 on Wednesday, which was much higher than this week’s low of $0.486. Other DeFi tokens like MakerDAO, AAVE, and Compound jumped as well.

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Curve woes continue

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Curve DAO is one of the biggest players in the decentralised finance industry. The network made headlines this week after being a victim of a hack that drained over $100 million across multiple pools like msETH/ETH and pETH/ETH. Read more about the Curve hack here.

CRV, its token, also came under pressure after it was revealed that the company’s founder had huge loans backed with it. As a result, if these loans came under pressure, it would have led to substantial liquidations. Some investors, including Justin Sun, the founder of Tron, intervened and bought the token. 

It is unclear why the CRV token jumped sharply overnight. There are three main possible reasons for this. First, it happened as investors bought the dip. In the past, we have seen crypto traders buy tokens when they crash. For example, we saw them buy Terra Luna and FTX Token when their ecosystems were in trouble.

Second, another possible reason is that large players in crypto are pumping the token in a bid to prevent Michael Egorov’s holdings from being liquidated. Justin Sun bought tokens worth over $2 million on Tuesday.

Third, this rebound is part of the crypto comeback after Fitch decided to downgrade the United States. The downgrade pushed most cryptocurrencies higher in the overnight session, with Bitcoin rising above $30,000.

Curve DAO token price forecast

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Curve DAO token

The other reason is that this could be a dead cat bounce. In most cases, cryptocurrencies tend to bounce back briefly after they crash hard. Turning to the 4H chart, the token rebounded and flipped the important resistance point at $0.560, the lowest level in June. 

It has remained below the 50-period and 25-period moving averages while the Relative Strength Index (RSI) moved above the oversold level. Therefore, this rebound, like other dead cat bounces, could be temporary, which will see it resume the bearish trend. If it happens, the next Curve DAO token to watch will be at $0.50.

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