$XLM Rally at Risk? 3 reasons why Stellar Lumens May Plunge After Recent 80% Surge.
Stellar Lumens (XLM) has witnessed an extraordinary surge wherein it has appreciated by nearly 80% in a very brief period of time. Nonetheless, market analysts caution that the impressive upside movement could be at risk of significant risks and there might be a price correction. The main issue is revolving around the principle of mean reversion, which implies that the price of assets, after a large movement, would go back to its average point. After a sharp rise, the price of XLM looks excessive, indicating that a pullback is possible.
Furthermore, technical chart cross-examining outlines that Stellar Lumens has since diverged sharply with the upper end of a longstanding decreasing path. This mismatch, is a good sign that the status quo price level might not be sustainable short-run. Such technical patterns are typically monitored closely by traders since a move beyond a resistance level can be followed by a sudden sharp retraction.
Mean reversion is a well-known market phenomenon where prices tend to gravitate back toward their historical average after extreme moves. For Stellar Lumens, this concept is particularly relevant due to its recent phenomenal rise. This dynamic implies that the current elevated price may not hold, increasing the likelihood of a downward adjustment as the market corrects itself. This mechanism serves as a natural counterbalance to unsustainable rallies, helping maintain market equilibrium.
Lastly, the exceptional distance between Stellar Lumens’ current price and key technical trendlines highlights an unmatched level of market exuberance. This phenomenon often precedes price corrections as the asset adjusts to more sustainable levels. Such divergence, while indicative of strong bullish momentum, also carries the potential for heightened risk, especially in volatile markets.
