AXS, the native token of Axie Infinity, a play-to-earn nonfungible token (NFT) game congenital atop the Ethereum blockchain, rallied more than 100% on a quarter-to-date (QTD) timeframe to refresh a new record high in a higher place $155.

Nonetheless, the cryptocurrency now risks paring a portion of its contempo gains as a key technical indicator, dubbed the relative strength alphabetize (RSI), flashes its overbought weather. In doing and so, information technology might correct below $90 — almost a 40% drop.

The bearish outlook surfaces after studying the relationship between AXS's cost and its RSI readings. In detail, when the RSI rallies above 70, information technology mostly prompts AXS to either consolidate sideways or lower after.

Simply in either instance, the token ends upwards testing its twenty-day exponential moving average (20-day EMA; the green wave in the chart below) as an acting support level.

AXS/USD daily price nautical chart featuring its response to RSI readings above 70. Source: TradingView

For case, RSI has closed above 70 three times since July 1, 2022, and each fourth dimension prompted the price to hit its 20-day EMA within seven to xxx days. That made buying AXS against an overbought RSI reading a risky preposition for traders, increasing their probability of facing curt-term losses.

As a effect, the Axie Infinity token could get through a similar bearish trajectory in the days/weeks ahead, with its adjacent downside target sitting around $87. Still, if the price rallies further alee, as happened after July's overbought signal, AXS's surly target could move to or in a higher place $90.

Is hodling a better strategy?

The 20-day EMA served as a buy indicator for traders following the RSI-led corrections. In detail, traders decided to buy the dip in anticipation that AXS's price would retest and close above its previous loftier levels.

Therefore, it is visible that traders who did not sell their AXS holdings during the cost corrections toward the twenty-day EMA managed to earn decent paper profits — the Axie Infinity token has climbed more than 2,500% since July 1.

AXS'southward growing utility within the Axie Infinity virtual world, chosen Lunacia, has emerged as one of the primary catalysts behind its demand among gamers and traders. In item, players maneuver colorful creatures called Axies to earn two kinds of tokens.

The first, known as Minor Love Potions (SLP), is awarded for successful battles; it can exist cashed out or exist reused to breed new Axies. Meanwhile, the second token, AXS, can be earned by winning seasonal tournaments or selling Axies in Axie Infinity'southward dedicated in-business firm marketplace.

As of Mon, Axie Infinity's active user count tallied to 1.85 million, up over 4,500% since April, with its full cumulative revenue climbing to $815 million in the same period, as per Token Concluding. That made Heaven Marvis, the firm behind Axie Infinity, the fifth-nigh valuable video game visitor globally by market place capitalization.

Height gaming companies in the world. Source: Messari

The potent fundamentals have intensified traders' confidence in AXS, which explains its power to bounce back every fourth dimension after undergoing a abrupt correction toward its 20-day EMA.

AXS staking service, DEX launch

The latest bout of buying in the Axie Infinity markets also surfaced due to a new feature that allows AXS holders to pale their tokens to earn yields. Since its launch on Thursday, the staking feature has attracted more than than 12.44 million AXS tokens (~$1.88 billion at current rates).

AXS staking dashboard. Source: Axie Infinity

Staking effectively takes active token supply out of apportionment, which, against a rising need for the nugget, tends to push button its prices college.

Related: Massive airdrop and AXS staking catapult Axie Infinity to a new all-time loftier

Meanwhile, Sky Mavis announced that it would launch a decentralized exchange on Ethereum-linked sidechain Ronin. In doing so, the company aims to ensure faster AXS and SLP liquidity to players during gameplay without needing to rely on cross-chain bridges to purchase or swap tokens.

The views and opinions expressed hither are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading motility involves gamble, you should acquit your own inquiry when making a determination.