Now that altcoin season is upon the states once again, multiple tokens are witnessing illustrious price hikes every day. In a sideways market, a key skill for a trader is the ability to conceptualize when an nugget will break out — and when everything is green, knowing when the rallies are coming to an terminate becomes equally essential.

This week, CELO embarked on a wink rally that generated an near vertical line on its cost chart, but then it quickly faded without ushering in a strong 2nd wave.

Aside from keeping a steady eye on candlestick charts, was there a meliorate way for traders to know in advance when to hop off?

A new DeFi initiative fuels CELO'due south toll spike

CELO is the native nugget of the Celo blockchain ecosystem, whose main goal is to introduce the convenience of decentralized finance, or DeFi, to underbanked smartphone users effectually the earth. A utility token that utilizes a proof-of-stake consensus mechanism, CELO is designed to facilitate transactions and governance processes on the platform.

On Aug. 30, a consortium of DeFi entities — including Aave, SushiSwap, Curve, 0x, PoolTogether and Celo — announced a joint educational attempt aimed at raising global awareness of decentralized finance, to which they pledged up to $100 million in grants and incentives.

In terms of the immediate consequence on crypto-asset prices, CELO stood to benefit the well-nigh from the news, as the Celo platform will serve as the primary infrastructure for the initiative. The money'southward toll soared immediately, gaining some 170% within the next 24 hours.

Extraordinary price spikes like this one frequently end with hard corrections. However, at that place is e'er promise for investors that an even more powerful pump is merely effectually the corner. In CELO'due south instance, however, the outset peak at $nine remained the high-h2o mark, and the coin's toll just went downwards from there.

Anticipating a price decline

In addition to being i of the calendar week's top gainers, CELO is also one of the few assets that recorded a low VORTECS™ Score.

The VORTECS™ Score is a machine learning algorithm that compares historic and current marketplace conditions effectually digital assets to aid crypto traders' decision-making. Bachelor exclusively to Cointelegraph Markets Pro subscribers, the indicator considers a host of variables — including price movement, trading volume, social sentiment and market place outlook — to make it at a score that assesses whether the nowadays conditions for a given money are historically bullish, neutral or bearish.

High scores indicate the model's confidence that the atmospheric condition currently observed are historically favorable; low scores, which occur less ofttimes, announced when the algorithm sees a pattern that in the past consistently preceded significant price drops.

CELO price vs VORTECS™ Score. Source: Cointelegraph Markets Pro

As visible in the above graph, CELO's VORTECS™ Score dipped into the blood-red zone below 30 when the asset'south price briefly recovered from $7.03 to $7.24 on its way downwardly from the peak value of $9. While this bounce could wait like the get-go of the rally's second leg, historical precedent suggested that the conditions around the coin were bearish.

Traders could utilise this insight in several ways. Those who had hoped for the price to soar again could be nudged to abandon these hopes and lock in their profits in a higher place $vii. Another strategy could exist to brusque CELO, wagering that its price would soon return to a downward slope.

Equally for CELO, the asset before long stabilized in the range between $5.50 and $6, which still represented considerable growth from the $4.30 region from which information technology exploded during the initial rally.

Cointelegraph is a publisher of financial information, not an investment adviser. We do not provide personalized or individualized investment communication. Cryptocurrencies are volatile investments and conduct meaning gamble including the adventure of permanent and total loss. By performance is not indicative of time to come results. Figures and charts are right at the fourth dimension of writing or every bit otherwise specified. Live-tested strategies are non recommendations. Consult your fiscal advisor before making fiscal decisions.