The crypto market continues to face volatility, and Stellar (XLM) isn’t immune to the downturn. Recently, 68% of XLM traders have taken short positions, leveraging a bearish sentiment fueled by weakening market dynamics. However, is there an opportunity hidden within this overwhelming short trend?
Why Traders Are Short on Stellar (XLM)
XLM’s price decline has aligned with a classic descending triangle pattern, a well-known bearish indicator in technical analysis. This pattern signals potential downside momentum, pulling the altcoin closer to a projected support zone of $0.188. Currently, XLM hovers near $0.212, a critical juncture where minor fluctuations could either stabilize prices or deepen the bearish outlook.
Furthermore, derivatives data shows that approximately 68% of traders have heavily bet on short positions across Stellar. This imbalance amplifies concerns, as crowded trades often lead to additional price reactions once momentum shifts. Below $0.210, long liquidations between $0.20 and $0.185 could create pressure, driving prices even lower.
Early Signs of a Potential Reversal
Despite the widespread bearish sentiment, on-chain data hints at budding optimism. The Chaikin Money Flow (CMF) indicator, which measures capital inflows and outflows, has been forming higher lows over the past four days. This divergence from XLM’s price action implies accumulation rather than panic selling.
For investors seeking opportunities, this suggests that buyers are gradually entering the market, albeit cautiously. If capital inflows persist, the market could potentially stabilize above the $0.210 support level, creating a short-term reversal.
What’s Next for XLM Prices?
To offset the bearish pressures, XLM needs to hold above the $0.210 support line. A sustained recovery from this level could propel prices toward the $0.230 resistance zone. Breaking through $0.230 would invalidate the bearish descending triangle pattern and may trigger new bullish momentum.
However, should prices fall below $0.210, a dip into the $0.20-$0.185 zone is likely. This would amplify selling pressure, especially with long liquidations increasing within this range.
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Final Thoughts
While 68% of XLM traders are betting short, the growing capital inflow demonstrates that accumulation could signal a turnaround. For cautious investors, analyzing key support and resistance levels is crucial before making any decisions. Remember, staying updated as the market evolves is the key to navigating crypto investments.
Always conduct your own research and consult with financial professionals before trading or investing.
