Analyzing FLOKI’s recovery odds after memecoin’s price drops to 3-week-low

  • FLOKI has fallen to a three-week low amid bearish pressure in the memecoin market
  • Derivatives traders have remained active, with declining funding rates and long/short ratios seeing an increase in short positions

The total market capitalization of memecoin fell by 17% in the past week alone, with the same value reaching $94 billion. CoinMarketCap. FLOKIthe sixth largest memecoin by market cap, reflected these bearish trends as the coin was trading at a three-week low of $0.000155 at the time of writing, following a 5% decline in 24 hours.

This decline has led to a spike in activity in both the spot and derivatives markets, which could precede a rise in volatility.

Derivatives traders remain active

Coinglass data shows that derivatives trading activity around FLOKI remains significantly high despite the bearish trend. In fact, Open Interest (OI) has increased from $21 million at the beginning of the year to $28 million.

This data suggested that few traders are closing their open positions on FLOKI. However, it could also indicate an influx of short traders into the market, which often leads to negative market sentiment.

(Source: Mint Glass)

Funding rates have also fallen significantly to 0.0028%, indicating that long traders are unwilling to pay high fees to maintain their open positions.

FLOKI Price Analysis as Sellers Fuel the Downtrend

At press time, FLOKI’s four-hour chart hinted that the memecoin may be oversold after the Money Flow Index (MFI) reached 21. This decline could precede a reversal if sellers are exhausted.

Source: TradingView

However, a bullish reversal may not occur soon after the 50-day Simple Moving Average (SMA) falls below the 150-day SMA. This bearish crossover indicated that FLOKI has entered a long-term downtrend.

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The rising selling activity has also seen FLOKI make a bearish breakout from its consolidation range. Therefore, traders should pay attention to the support level at $0.000145 as a decline below it will result in a monthly low.

Signals in the chain suggest…

A review of on-chain data on IntoTheBlock showed that FLOKI whales are unwilling to buy the dip despite the price drop. This after large transaction volumes fell by 14%.

However, there was a slight increase in the positions of large holders.

(Source: IntoTheBlock)

At the same time, the profitability of wallets with FLOKI decreased. This could increase selling pressure if traders choose to move their tokens to exchanges to minimize losses.

Nevertheless, there were several bullish signals, including slight growth in network activity, which could bode well for the altcoin’s long-term performance.

Is there a threat of a short squeeze?

FLOKI’s long/short ratio revealed a spike in the number of short sellers betting that the memecoin will continue to fall. This comes after the ratio neared a weekly low after falling to 0.856.

(Source: Mint Glass)

When there are many short sellers and FLOKI makes an unexpected move upwards, the forced closure of these positions can stimulate buying pressure, which will promote an uptrend. This short squeeze scenario could fuel the memecoin’s recovery.

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Credit : ambcrypto.com

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