Algorand Price Forecast: ALGO reversal lays the groundwork for a 30% decline

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  • Algorand price trap from an ascending channel break out spells trouble.
  • Bearish resolution is temporarily prevented by support at the 10-week simple moving average (SMA) 
  • Algorand at the forefront of green blockchain solutions.

Algorand price closed last week with a bull trap, just below the all-time high, and quickly declined to the channel’s lower trendline before attracting some buying interest. The well above average volume accompanying the reversal reinforces the topping formation thesis.

Algorand price has been encouraged by PPoS algorithm; it might not be enough

The high energy demands for Bitcoin mining have motivated ALGO to use an “environment-friendly consensus protocol” that has elevated the ecosystem into a leadership position in green blockchain solutions.

Some Bitcoin alternatives have addressed the carbon footprint problem by introducing a Proof of Stake (PoS) algorithm, but the solution sacrificed decentralization. In contrast, ALGO has taken it to another level to introduce a new algorithm called Pure Proof of Stake (PPoS).

The PPoS protocol enables Algorand to address the Blockchain Trilemma, according to the company.

 Addresses the so-called Blockchain Trilemma, in which none of the three key elements of an ideal blockchain – scalability, security, and decentralization – are compromised.

Moreover, the PPoS is carbon neutral because it doesn’t rely on significant energy use needs, unlike the Proof of Work (PoW) chains.

At the core of the PPoS algorithm is one guiding principle. The protocol picks block validators randomly and secretly for a certain period, ensuring that all users have an equal opportunity to be selected by the system, thereby creating a fully decentralized network. No one knows who the next block validator will be.

Last week, the bearish reversal from above the channel, or bull trap, was a signal to market participants that ALGO was facing substantial overhead near the all-time high of $1.86, and the follow-through this week has confirmed the bull trap. 

Algorand price is now probing the channel’s lower trend line but finding some support around the 10-week SMA. It is anticipated that the support will be short-lived, and the digital token will eventually decline to the 61.8% Fibonacci retracement of the rally since the March 2020 low at $0.77, which intersects with the August 2020 high.

Before reaching the target, ALGO will discover support at the 50% retracement at $0.98, and the channel’s measured move target at $0.84, representing a 30% decline from the channel’s lower trend line.

ALGO/USD weekly chart

ALGO/USD weekly chart

Patterns will baffle the best technicians and market operators, so it is sound money management to consider renewed price strength and a break out into new highs. The first area of resistance will be the 138.2% extension of the February crash at $2.25 and then the 161.8% extension at $2.49.

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