Pi Network price continued to retreat this week as investors remain concerned about its increasing supply.
Pi coin (PI) retreated to a low of $0.60, its lowest level in a week and 21% below its highest point this month.
The most likely reason for the sell-off is that more tokens are being released to the market each day. According to PiScan, over 105 million tokens will be unlocked this month.
1.57 billion more tokens will also be unlocked in the next 12 months. This averages at over 4 million tokens each day. These tokens are currently valued at over $954 million.
Like other assets, the price of a cryptocurrency is determined by supply and demand. An increase in supply when demand is weak will always lead to lower prices.
A similar situation occurs in the stock market, where shares drop whenever a company sells shares to raise capital.
Fortunately, some solutions can help to offset this dilution. One of them is a large-scale burning operation by the developers. For example, on-chain data shows that the Pi Foundation holds over 70 billion tokens valued at over $40 billion. It can burn some of those coins and boost the token’s value.
Pi Network can also propose burning some of the fees generated from its ecosystem of dApps. This is a common practice in the crypto industry. For example, the BSC Chain has burned BNB coins worth over $152 million using this mechanism.
Pi Network price analysis
The 4H chart shows that the Pi coin price has come under pressure in the past few days. It has retreated after rising to a resistance level at $0.7860 last week.
Pi Network has now dropped to $0.6085, which is also an important support level that coincides with the ascending trendline connecting the lowest point since April 7. It is also the first support of the Woodie pivot point.
It has moved slightly below the 50-period moving average. Therefore, the token will likely have a bearish breakout, with the initial target being $0.40, the lowest point this month. This target is about 35% below the current level.
The alternative for this scenario is where the coin rebounds if it receives a tier-1 exchange listing or if the developers comes up with a strategy to address the rising supply.
