Tornado Cash’s Recent Surge Suggests Potential for Price Correction Amid Bearish Momentum

• Tornado Cash (TORN) has surged by 40% in just 24 hours following its removal from the US Treasury’s OFAC sanctions list, driving significant market interest.

• Despite the impressive rally, analysts warn of potential price corrections as market indicators suggest overbought conditions.

• According to a recent analysis from COINOTAG, Tornado Cash faces significant outflows amid bearish macroeconomic momentum, hinting at possible price drops.

Tornado Cash experiences a remarkable 40% surge post-sanctions lift, but analysts caution overbought signals could lead to corrections ahead.

Tornado Cash Skyrockets Following Sanctions Relief

The recent surge in Tornado Cash’s price can be attributed to its notable removal from the U.S. Treasury’s Office of Foreign Assets Control (OFAC) sanctions list. This has invigorated investor interest, pushing the price to a height of $11.77, marking a 41% increase within 24 hours. However, as exhilarating as this rally is, the Relative Strength Index (RSI) has crossed the significant 70.0 threshold, indicating that the asset is currently overbought. Historically, this level often suggests a peak in bullish momentum, which occasionally leads to swift price corrections.

Market Indicators Signal Caution

As the bullish sentiment begins to wane, Tornado Cash’s price appears to be consolidating, which raises concerns among traders. The Chaikin Money Flow (CMF) has been persistently entrenched in the bearish territory, pointing towards selling pressure outpacing buying trends. Moreover, the outflows from Tornado Cash are at their highest levels since the coin’s inception, underscoring a waning interest among potential investors and traders.

TORN RSI. Source: TradingView.

The persistent outflows contrast sharply with the recent price rally, suggesting that without substantial capital inflows to counterbalance this trend, TORN may struggle to maintain its current valuation.

TORN CMF. Source: TradingView.

Assessing TORN’s Price Action and Support Levels

Currently trading at approximately $11.77, Tornado Cash has displayed a dramatic intra-day high sculpted from its 135% gain over the past twelve days. However, this rapid ascent poses critical downside risks, particularly with the overbought condition and prevailing bearish momentum.

Key support levels are identified at $11.63 and $9.75. A breach of these benchmarks could escalate selling pressures, dragging the price down to $7.36, which could erase much of the recent gains.

TORN Price Analysis. Source: TradingView.

Conversely, should Tornado Cash successfully retain its bullish momentum beyond $11.63, it may set its sights on testing resistance near $15.81. A sustained rally to this higher threshold would not only invalidate current bearish sentiments but would also confirm the validity of recent price advancements.

Conclusion

In summary, while Tornado Cash has captured significant attention with its recent spike, market indicators reflect potential corrections ahead. The RSI warning signals and bearish CMF trends suggest investors should proceed with caution. Looking ahead, the ability of TORN to maintain its position above critical support levels will be vital for determining its next move in the face of ongoing market complexities.