Is KuCoin stock (KCS) overvalued after rising 100% in a month?

The price of KuCoin (KCS) shares rose in early trading on Wednesday, July 7, in part due to the ongoing market rally of the leading exchange-based utility tokens.

The 72nd largest cryptocurrency peaked at $ 14,847 that day before correcting downward on temporary profit-taking. The decline was accompanied by decent volume, suggesting the sell-off could continue during the European and US sessions.

Source: TradingView

At the time of writing, KCS / USDT is trading near $ 14, up over 100% from the Monthly Time Frame (MTD).

Hence, KuCoin’s bearish correction appeared as an attempt to neutralize its excessive bullish momentum. Its Relative Strength Index (RSI) jumped to 70 one day after the last rally, indicating an “overbought” condition.

The RSI continues to cross above 70, warning of temporary downside risk for KuCoin before attempting to break the USD 15 technical resistance (as shown in the graph above).

Bullish setup for KuCoin stocks (KCS)

Conversely, a break above the descending channel area increased the prospect of an upward extension of the trend. As the following charts show, KCS is trending down while oscillating in bearish territory – this pattern appears like a falling wedge.

A bearish wedge is a bullish reversal pattern that occurs when the price movement of an asset forms a cone while sloping down, making at least two reactive highs and lows. The correction of KCS / USDT to the lower trendline creates a similar descending structure.

Put up a falling wedge. Source: TradingView.com

Technically bearish wedge breakout to the top. Hence, KSC’s recent resistance break, coupled with the surge in volume, could be described as a bullish breakout, with a profit target near the high of $ 19,751 (wedge height).

Basic principles

Overall, KCS’s upward move is part of a general price rally in the exchange token markets.

With the exception of SUSHI, the exchange tokens have increased in parallel. Source: Messari

However, the KCS market has had significantly less volume than its competitors in the last 24 hours. For example, the volume of the exchange token from second place is around 620,000 US dollars (belongs to Unus Sed Leo). The adjusted KuCoin 24-hour volume is USD 63,531.

Thin volume means fewer KCS transactions. In return, the KCS liquidity on the market is lower. As a result, an asset’s price volatility increases in a low volume market, making it prone to wild up and down movements.

This acts as a headwind for the KuCoin bulls as they try to confirm the declining wedge profit target.

KuCoin Shares or KCS serves as a utility token on the KuCoin exchange. The platform uses KCS to reward users for using their service, similar to how Binance implemented BNB to give users a discount on trading fees. Meanwhile, KCS holders also receive daily dividends, i.e. KuCoin bonuses that are equal to 50% of trading fees on the exchange.

As KuCoin becomes a fully decentralized platform, it plans to use KCS for transaction fees. The exchange also intends to buy back and incinerate half of KCS’s $ 100 million supply cap. The redemption funds also come from KuCoin transaction fees.

Annie

According to Cointelegraph

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