PENGU rallies ahead of Abstract mainnet launch, but potential correction looms

After bottoming out earlier in the week, PENGU continued its recovery on Jan. 23 with a sharp rally, fueled by community anticipation of the Abstract mainnet launch and related speculation.

The Pudgy Penguins (PENGU) token rose 8.7% to an intraday high of $0.0264 on Jan. 23, making it one of the top performers among the largest 100 cryptocurrencies by market cap per CoinGecko. With a market cap that surpassed $1.6 billion, the meme coin witnessed a 20% jump in daily trading volume, hovering over $411 million.

PENGU’s recent rally came despite the broader NFT token market falling 3.8% over the past day, with popular projects such as Floki (FLOKI) and Apecoin (APR) witnessing steep losses of 16.2% and 10.9% over the past week.

The key driver that helped PENGU buck the broader trend was growing anticipation holders regarding the launch of Abstract, an Ethereum layer-2 network developed by Igloo Inc., the parent company behind both PENGU and the Pugy Penguins NFT collection.

Pudgy Penguins is expected to launch on Abstract alongside other projects, and there are rumours that PENGU holders will be eligible for an airdrop of the layer 2 network’s native token during its token generation event.

While these rumors have not been officially confirmed, Abstract has announced a January mainnet launch without specifying a date, leaving only a few days for the launch to materialize as the month approaches its end.

The surge in PENGU’s price implies that investors are positioning themselves early, anticipating potential benefits from the upcoming network launch.

Another factor potentially adding fuel to the rally could be the jump in its non-fungible token sales. According to CryptoSlam data, Pudgy Penguin sales rose by almost 80% on Jan. 23, making it the sixth best-performing NFT collection. Its daily transactions jumped by 100% to 16.

PENGU technical analysis

Although the current momentum is pushing PENGU higher, technical indicators suggest that a potential price correction may be on the horizon.

On the 1-day PENGU/USDT price chart, the meme coin’s price was close to the lower Bollinger Band, which means that bears were in control and could lead to further losses if selling pressure builds up.

Combined with the Relative Strength Index at 41, which also signals a bearish momentum but not yet an oversold condition, the market may experience additional downward pressure unless buying interest picks up to counteract the trend.

The Supertrend line stood above the asset’s price, while the Chaikin Money Flow, with a negative reading, indicated buying pressure was waning.

Based on these indicators, PENGU could soon face a pullback, potentially retracing to its local support at $0.022. A drop below this level could push it further toward its psychological support at $0.020.

However, one potential catalyst that could invalidate this scenario is ongoing speculation that President Donald Trump could soon end capital gains tax on crypto profits for U.S.-based cryptocurrencies. Projects developed by U.S. companies like Igloo Inc. could see significant upside if such rules are enforced.