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Injective Protocol Demand Surges Amid Massive INJ Token Burn

By:
Yashu Gola
Published: Jun 13, 2024, 17:38 GMT+00:00

Key Points:

  • The completion of Injective Protocol’s token burn on June 12 sparked increased demand, propelling its price up by over 20%.
  • The Federal Reserve's potential interest rate cuts in 2024 have further boosted the Injective Protocol market sentiment.
  • On-chain data shows a consistent increase in holdings by INJ’s largest investors.
Injective Protocol, FX Empire

In this article:

Injective Protocol’s (INJ) token burn event, which concluded on June 12, increased its demand among the crypto traders, resulting in INJ achieving better intraday returns compared to top-ranking rivals such as Bitcoin (BTC) and Ethereum (ETH). Could INJ price rally further in June? Let’s discuss it later in the article.

INJ Price Hits Two-Month High on Token Burn FOMO

Notably, the Cosmos-based layer-2 blockchain burnt 6 million INJ tokens on June 12, per its official announcement. The prospects of a massive INJ supply going out of active circulation prompted traders to increase their bullish bets on the token, leading the cryptocurrency’s price higher by over 20% to reach approximately $33 on June 12.

A modest correction ensued, but INJ’s price has increased by around 18.50% since the token burn announcement. In doing so, the Injective Protocol has also outperformed BTC and ETH, which jumped by a more modest 4.65% and 4.50%, respectively, in the same period.

INJ/USDT vs. BTC/USD and ETH/USD daily price performance chart. Source: TradingView

Nonetheless, it is important to notice that Injective Protocol’s token burns occur repeatedly following a weekly auction. The protocol usually sends 60% of all the trading fees (collected in INJ) to a dormant address, thus making the token deflationary in nature.

Not all token burn events coincide with INJ price rallies, indicating lower demand despite the reduction in circulating supply. Nonetheless, this time, additional bullish catalysts are in play that have boosted demand for cryptocurrencies like INJ as a whole.

Increasing Rate Cut Bets, Whale Accumulation Boost INJ Prices

In addition to the token burn event, Injective Protocol’s gains picked momentum from the Federal Reserve’s dovish outlook at the end of its two-day policy meeting on June 12.

Notably, the Fed officials revised their expectations for interest-rate cuts in 2024, reducing them from three to one. However, they have left the possibility of one more reduction open, contingent on further cooling of the U.S. inflation.

Chair Jerome Powell highlighted the committee’s careful consideration of risks and noted a split among officials: seven anticipated one rate cut this year, eight saw two, and four expected none.

Fed’s June Dot Plot. Source: Bloomberg

Futures traders have increased their bets on interest rate cuts for 2024 after the Fed meeting. According to CME data, there’s now approximately a 59.5% chance of a rate reduction in September compared to 48.6% a month ago and a 50.6% chance in November versus 45.2% a month ago.

Lower interest rates typically result in more liquidity in the market as borrowing costs decrease, potentially leading to more funds being invested in cryptocurrencies. Meanwhile, they also typically impact the U.S. dollar’s strength, thus making riskier assets like cryptocurrencies more attractive for investors as they seek a hedge against the potential devaluation of fiat currencies.

U.S. dollar index’s daily performance chart. Source: TradingView

Meanwhile, Injective Protocol’s on-chain data reveals an increase in the supply held by its richest investors, also known as “whales.”

Notably, the supply held by entities with a 10 million—100 million INJ balance (the black line) has been increasing consistently since April, indicating that most long-term holders have been buying the token during its price correction.

INJ supply distribution among whales. Source: Santiment

This rise sharply contrasts a drop in the supply held by the 1 million—10 million INJ (the brown line) balance cohort, indicating that these entities are accumulating the tokens to enter the 10 million—100 million INJ balance cohort.

Overall, the on-chain data indicates that most whales are accumulating in anticipation of a bull run in the coming weeks or months.

What Does Injective Protocol Technical Analysis Say?

From a technical perspective, INJ’s price looks poised to undergo a sharp bullish reversal thanks to the formation of the classic cup-and-handle pattern.

For the unversed: A cup-and-handle pattern is characterized by a U-shaped recovery followed by a period of consolidation. It typically resolves after the price breaks above the resistance line, also known as the neckline, and rises by as much as the maximum distance between the cup’s lowest point and the neckline.

As of June 13, INJ’s price had broken above the cup-and-handle neckline but with weaker volumes. The cryptocurrency is now testing the neckline as support, eyeing a sharp rebound toward the pattern’s upside target at around $40, up about 35% from the current price levels, in June. This level coincides with the 0.618 Fibonacci retracement level.

INJ/USDT daily price performance chart. Source: TradingView

Conversely, a break below the neckline, coinciding with the 0.236 Fibonacci retracement level of around $29, risks sending INJ price toward the 50-day exponential moving average (50-day EMA; the red wave) near $27. Continued selling below the 50-day EMA will bring the 0.0 Fib line into view, which is around $21, down roughly 27% from the current price levels.

About the Author

Yashu Gola is a journalist focusing on cryptocurrency markets since 2014. He writes for Cointelegraph and CoinChapter and has previously served as the chief editor for NewsBTC.

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