Stacks (STX) is a top-100 cryptocurrency that enables smart contracts on Bitcoin's blockchain without the need for any weird "wrappers" - Stacks is its own blockchain that happens to leverage the Bitcoin network for security. While it has been consolidating under $1.60 for almost two months, I believe there are both fundamental and technical factors at play that could start a rally like never seen before.
TLDR
STX's price action and momentum are consolidating to extremely low levels. In the past, this has precipitated >100% moves. The catalyst for such an event could be the release of top-tier dApps built on Stacks, and many apps are being released from the Stacks accelerator next week.
Technical Analysis
- Extremely low volatility - I measure volatility with the BBWP indicator on Tradingview, as seen in the second panel above. The blue vertical signal line means 7-day volatility has never been this low in the past 255 days. Such low volatility typically precedes an extremely volatile movement, and the higher-lows after rejecting $1.60 highs gives this a bullish bias.
- Centrally consolidating momentum - Not only is price action consolidating, so is the momentum. I measure momentum using Stochastic oscillators, which have consolidated in a triangle-pattern near the middle of the range (at the 50 read). Momentum will eventually need to breakout in one direction, creating a strong trend.
- Historical confluence - We have actually seen both of these signals occur at the same time on Stacks. The first time was December 7 2020 - we see a blue signal on BBWP and a similar triangular stoch consolidation. This led to a 110% gain before any long-lasting pullback. The most recent breakout of this sort was on April 5 2021 and led to a 133% gain.
Fundamental Catalyst
The April 5 breakout was catalyzed by Stacks' launch on a Korean exchange, which led to an immediate surge in new buyers. Bullish news this time around could create a similar rally, especially if the event similarly creates an inherent increase in buyers.
As a smart contract platform, STX long-term performance is tied to the success of dApps built on Stacks. This past summer 2021, the Stacks creators sponsored a startup accelerator for Stacks dApps, offering teams as much as $50,000 in starting capital. This weekend (September 4-5 2021), Stacks Accelerator dApps will be unveiled to potential investors, and soon to the public. There are a few projects I believe will be huge, including a lending/stablecoin protocol built on Stacks. You can view all the teams here.
I believe the reveal of a project with massive potential could catalyze STX's price for two reasons. The first is obvious - a successful dApp could eventually attract new users to the Stacks platform, and the future influx would become priced-in. The second reason offers more similarities to the April 5 catalyst. Stacks apps require gas in the same way as Ethereum apps, and accelerator startups have the option to pay for gas for their customers to streamline the dApp's usage (they would then monetize in other ways). If investors buy into a project this weekend, that project may use seed capital to prepay a large portion of gas, inherently creating a large volume of buyers.
Summary
I think both the technical and fundamental factors at play are even larger than any similar event Stacks has seen in the past. The fundamental catalyst is actually relevant to Stacks' core value proposition, and the amount of consolidation this time is by-far more extreme than the other two iterations I presented (the blue-bar signal has been going for many more days than ever before). The coming rally may look nothing like either of the two previous ones.
While I strongly believe in the potential for a massive rally, please be aware that STX price experiences wild swings, even during these consolidation period. Be very careful if you plan to use leverage to trade this token.
DISCLAIMER I am not a financial advisor and this is not financial advice. Since I believe in this play I obviously have positions that would benefit from a price increase.
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