Stellar (XLM) has experienced significant volatility in recent days, dropping by $130 million in open interest (OI) after a massive surge in its price.
After a massive surge in its price, Stellar (XLM) has experienced a significant drop in open interest (OI) to the tune of $130 million. The altcoin enjoyed a dramatic price increase of over 100% in just a week, capturing the market’s attention and fueling excitement. However, this enthusiasm seems to be waning, as evidenced by the sharp decline in open interest and other market signals suggesting a weakening rally.
Stellar’s impressive price rally saw the altcoin reach its highest point in a long while. On November 24, XLM’s open interest hit an all-time high of $339 million, a figure that caught the attention of many traders. This surge in interest was likely driven by the rise in Ripple’s (XRP) price, as the two assets have often seen price movements tied together. However, the momentum appears to be fading.
As of the most recent reports, XLM’s open interest has decreased by $130 million, now standing at $209 million. This drop in OI reflects a reduction in the number of active leveraged positions, signaling a cooling off in derivative market activity. The reduction in open interest often indicates that traders are closing their positions, either due to a loss of confidence in the asset’s future price movement or because the price has peaked.
This drop in open interest coincides with a 10% loss in XLM’s price within the past 24 hours, confirming that the rally’s momentum is faltering. As a result, traders are increasingly uncertain, with fewer positions being opened in anticipation of further gains.
Another bearish sign for XLM is the decline in its social dominance. Social dominance is a metric that tracks the proportion of cryptocurrency discussions focused on a particular coin relative to other assets. A rise in social dominance typically indicates increased interest and demand, while a decline suggests waning attention.
Not too long ago, XLM’s social dominance stood at 3.13%, but it has since plummeted to just 1.73%. This sharp decrease in market interest suggests that traders and investors are shifting their focus to other cryptocurrencies, further contributing to the bearish sentiment surrounding XLM. If this trend continues, XLM may find it challenging to maintain its current value and may see further price declines.
Given the current market conditions, XLM could face additional losses if the downward trend in open interest and social dominance continues. On the daily chart, the Money Flow Index (MFI) shows that XLM was recently in overbought territory, a situation that usually precedes a price correction. The MFI, which tracks buying and selling pressure, suggests that the price could fall to $0.28 if the current conditions persist.
The next level of support for XLM appears to be at $0.22. A break below this level could trigger a further decline, potentially pushing the price down to $0.17. However, it’s important to note that these predictions are based on the assumption that the current trends in open interest and social dominance continue. If buying pressure picks up, XLM could see a resurgence, with a rally to $0.64 being a potential target in the event of a market reversal.
