Thinking to go long on Axie Infinity? Here’s why you shouldn’t at the moment
Axie Infinity price witnessed a quick exponential upswing over the past week, indicating a resurgence of buyers. However, this uptrend is facing a thicket of hurdles which reveal that an up move is unlikely and a down move could be brewing.
End of bullish momentum
Axie Infinity’s price rallied 51% over the last four days, revealing a comeback of bulls for the metaverse bunch. This uptrend plowed through the 50-day Simple Moving Average (SMA) and the 100-day SMA at $54.22 and $65.77, respectively.
While this move is impressive without a doubt, it is also retesting the daily supply zone, extending from $70.86 to $80.19. This barrier has prevented AXS from moving higher in early February after AXS rallied 51% in three days.
Considering the striking similarity of these moves, there is a good chance that Axie Infinity’s price will pull a hundred and eighty again, leading to a retracement. However, unlike the last time, the 100-day SMA at $65.77 will play a crucial role in absorbing the selling pressure and supporting the price from moving lower.
Therefore, investors need to exercise caution and patience before longing AXS at the current levels.
Source: TradingView, AXS/USDT 1-day chart
The technicals forecasting a retracement seems to make sense, especially after a 51% upswing, but this on-chain metric reveals why a downswing is around the corner. The active deposits metric is used to track the inflow of AXS tokens into centralized exchanges.
Similar to the supply on exchanges, this index tracks the inflow of such tokens, allowing investors to identify local tops or bottom. A massive inflow suggests that market participants are likely to sell their holdings to realize gains. A string of such investors could easily cause a pullback.
For Axie Infinity, the number of active deposits hit 98, indicating that a plethora of investors is looking forward to booking profits. Interestingly, the 51% upswing in early February saw 105 active deposits, making a compelling argument on why investors should stay away from speculating on AXS to the upside.
Regardless of the short-term pessimistic outlook, investors can expect this uptrend to continue due to the overall shift in the narrative from bearish to bullish for Bitcoin. However, if the sellers take control and push AXS to produce a move below the 50-day SMA at $54.23, it will invalidate the bullish thesis.