Floki Inu price set to face correction before initiating a potential 70% rally

Floki Inu price is about to witness a drawdown in response to the recent rally. However, the result of this drawdown could bode well for the bulls. If the meme coin reaches the accumulation zone and entices a buying spree, the consequential rally would pull it up to mark a multi-month high.

Floki Inu price rally is likely to pause before resuming a rise

Floki Inu price, after noting a stellar 115% rally, is noting a decline as the bullishness saturated towards the end of October. Trading at $0.03106, the meme coin is going to continue declining until it tests $0.02566 as a support. This test would bring the cryptocurrency to bounce back from the accumulation zone marked between $0.02079 and $0.02750.

With the meme coin declining to this level, a rather bullish point, investors can begin stocking up on FLOKI. If buyers maintain their stance and consistently accumulate, the meme coin could have a shot at reinitiating an uptrend. Back in October, at the beginning of the month, a similar momentum was witnessed, which resulted in Floki Inu price charting a 30% rally.

This time around, a much larger rally is expected as the next major resistance faced by Floki Inu price is marked around $0.04200. A breach of this may not be likely, but testing this resistance would warrant a 70% rally from $0.02566.

1000FLOKI/USDT 1-day chart

A confirmation of this possibility can be achieved if and when the Relative Strength Index (RSI) tests the neutral line at 50.0 as a support floor. Provided investors continue booking profits and Floki Inu price does note a decline as significant in the first place.

However, if the RSI dips further below or FLOKI fails to bounce back from the accumulation zone, a gradual decline can be expected, which would invalidate the bullish thesis if the meme coin observes a drawdown to $0.02000.

The fall before the rise

The reason a steep dropis expected out of Floki Inu price is that the on-chain behavior of the meme coin lines up with a similar pattern observed in the past. The Market Value to Realized Value (MVRV) ratio is an indicator that is used to assess the average profit/loss of investors who purchase an asset. The 30-day MVRV ratio measures the average profit/loss of investors who purchased an asset in the past month. 

In the case of FLOKI, the 30-day MVRV sits at 20%, which indicates that investors who purchased the meme coin in the past month are sitting at 20% profit. These investors are likely to sell their holdings to realize profits, which could trigger a sell-off. As seen in the chart, when MVRV hits 15% to 54%, Floki Inu has undergone major corrections; hence, this area is termed a danger zone.

Floki Inu MVRV ratio

Consequentially, a steep decline is likely for Floki Inu price, hopefully into the accumulation zone, which could result in a 70% rally.

The reason $0.04200 is expected to act as a critical resistance is that investors purchased about 1.33 trillion FLOKI at an average of this price. The last time this price was seen was back in May this year, which means that for the past six months, these investors have been bearing losses on their investments.

Floki Inu GIOM

Thus, an opportunity to sell their tokens even at break-even would be one these investors would not miss, and such a huge sell-off would naturally result in the rally halting. Thus, $0.04200 is poised to act as a resistance that FLOKI may not be able to breach, resulting in a 70% rally.