Injective Protocol’s native token, INJ, has experienced a notable decline of 18.77% over the past five days. As a layer-1 blockchain facilitating cross-chain transactions, Injective has garnered significant attention from investors. However, recent on-chain data suggests that INJ may face further declines, raising concerns about its short-term performance.

Analyzing Recent Performance

Injective’s recent performance has been under the spotlight, with the token dropping significantly in a short period. Investors often look for opportunities to buy during such dips, hoping for a rebound. However, on-chain data paints a different picture, indicating potential challenges ahead for INJ.

Market Value to Realized Value (MVRV) Ratio

One of the critical indicators for assessing the future prospects of a cryptocurrency is the Market Value to Realized Value (MVRV) ratio. The 30-day MVRV ratio for Injective currently stands at 15.35%. This low ratio suggests that INJ investors are experiencing low profitability, potentially deterring them from selling at current prices. Despite this, the ratio is higher than it was on July 23, indicating a decrease in the unrealized loss rate for some investors.

Investor Sentiment and Market Conditions

The year-to-date (YTD) performance of INJ has been impressive, but recent trends indicate a shift in investor sentiment. Some investors may be abandoning the cryptocurrency, leading to a potential selling phase. This shift is reflected in the exchange on-chain market depth, which shows a substantial number of tokens available for sale at $23.99, while the buying interest appears lower. This imbalance suggests that INJ prices could face additional downward pressure.

Technical Analysis and Future Projections

As of now, INJ is trading 54.25% below its all-time high (ATH). A closer look at the daily chart reveals that INJ has been moving within a descending channel since June 13. This formation is typically bearish, but INJ broke out of this pattern when the price moved to $28.12.

Critical Support Levels

In the event of a further decline, the critical support level for INJ is $20.22. If the bulls fail to defend this level, the price could drop to $18.19. Conversely, a potential rise in Bitcoin (BTC) could positively impact INJ. The strong correlation between BTC and INJ suggests that an increase in Bitcoin’s price could lead to a corresponding rise in INJ, potentially pushing the price to $27.49.

Will Injective (INJ) Rise?

The possibility of INJ recovering depends heavily on broader market conditions and Bitcoin’s performance. Given the strong correlation between BTC and INJ, a bullish trend in Bitcoin could trigger a similar response in Injective’s price. However, investors should remain cautious and closely monitor market indicators and support levels.

Conclusion

Injective’s recent decline has raised questions about its immediate future. While the low MVRV ratio indicates that current investors are experiencing low profitability, the potential for further declines cannot be ignored. Technical analysis suggests critical support levels that must be maintained to avoid further downward pressure. Additionally, the correlation with Bitcoin’s performance provides a glimmer of hope for a potential rebound.

As the cryptocurrency market remains volatile, investors should stay informed and consider both technical and fundamental factors when making decisions. The coming days and weeks will be crucial in determining whether INJ can stabilize and recover from its recent losses or if it will face further challenges.