Axie Infinity (AXS) axes almost half its value following 971% bull run

A supersonic rally in the Axie Infinity market that saw its native token, Axie Infinity Shards (AXS), surge by 972% in just 23 days is now risking exhaustion.

AXS price Fib fractal

The AXS/USD exchange rate plunged to as low as $16.02 on July 19, four days after topping out at $29.86. In doing so, the pair attempted to neutralize its extremely overbought sentiments, as flashed by its daily relative strength index (RSI) that treaded above 84 last week, showcasing profit-taking sentiment among investors.

AXS/USD showed signs of rebound at $16.38, a level that coincides with the 61.8% Fibonacci level that, in turn, constitutes a Fibonacci retracement graph made from the $23.98-swing high to $4.07-swing low. The two levels represent the top and bottom of AXS/USD’s current curve range.

Additional support came from the pair's 20-day exponential moving average (20-day EMA; the green wave). The wave (now near $15.38) was instrumental in strengthening AXS/USD’s upside bias at the beginning of this year, capping wild downside retracements and sending prices in the direction of their previous uptrend.

Previous top-to-bottom Fibonacci retracement setups present the 38.2% Fibonacci level as a key reversal indicator. For example, AXD/USD rebounded by almost 225% after testing $3.62 — the 38.2% Fibonacci level during late March's pullback move.

Similarly, the level held the AXS/USD's bearish attempts during April to May before giving up and paving the way for a price crash, as shown in the chart below.

Therefore, the previous fractal hints at an extended downside correction for AXS in the sessions ahead. As a result, the current 38.2% Fibonacci level ($11.68) serves as the interim profit target for bears.

Nonetheless, breaking below the 38.2% Fib level could expose AXS/USD to the support confluence of the 23.6% Fibonacci level ($8.77) and the 50-day simple moving average (around $8.29).

Fundamentals

Despite its latest bearish move, AXS was up more than 2,500% on a year-to-date timeframe.

In detail, the cryptocurrency serves as a governance token for Axie Infinity, a nonfungible token (NFT)-based online video game developed by a Vietnamese studio Sky Mavis. Players compete and win rewards in the form of an in-house token called Small Love Potion (SLP). In turn, they ca use SLN to breed digital pets, called Axies, inside the game.

By doing so, dedicated players can make between 100 to 200 SLP tokens a day on average. That roughly equals $77.8 to $155.6 a day, per the current exchange rate of $0.77 per token.

The play-to-earn feature has been received well by cryptophiles. As of just last week, Axie Infinity raked in over $84 million in fees in the previous 30 days, more than Bitcoin (BTC) and Ethereum made in protocol revenue and more than all the top decentralized finance apps, including PancakeSwap, MetaMask, MakerDAO, Synthetix and others.

Moreover, while AXS can be exchanged on other platforms, 97% of its volume comes from the Axie Marketplace, a dedicated portal to trade digital pets that, in turn, passes the fees to the Axie Treasury.

According to Axie World, the Treasury now holds about $23.42 million in marketplace fees and $76.15 million in breeding fees (fees charged to breed digital pets).

In turn, the fee is given as a weekly yield to users who stake AXS to run and govern the Axie Protocol.

"Axie Infinity has set itself apart from the rest of the pack — crypto games — and continues to rise," commented Mason Nystrom, a researcher at Messari, adding:

"The next major milestone will be the launch of the alpha of its virtual world, Lunacia in Q4."

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, and you should conduct your own research when making a decision.