Maker (MKR) has experienced a significant price rally this week, jumping by 60% since February 16. This surge has brought attention to the decentralized finance (DeFi) lending protocol, making it one of the hottest tokens in the market right now. However, despite the recent rise, there are concerns that this rally may not last, and traders might want to consider selling soon before a potential bearish reversal hits.

The Rally and Burn Events

The price spike was largely fueled by increasing demand and a shift in momentum on shorter timeframes. Additionally, a significant event on February 20 raised speculation within the community. Whale Alert, a well-known crypto tracker, revealed that $156.77 million worth of MKR tokens were burned in a series of eight transactions from an unidentified wallet. This burn was expected to reduce the circulating supply and, in theory, push the price higher due to a basic economic principle: less supply could mean higher demand.

While this event initially fueled hope among traders, it didn’t appear to ignite the buying frenzy that many had anticipated. Despite the burn, MKR’s price did not see the same kind of momentum boost that typically accompanies such events.

A Bearish Structure on the Weekly Chart

Looking at the broader picture, the weekly chart for MKR shows signs of a potential reversal. Despite the recent surge, the overall swing structure remains bearish. A sell-off earlier in February pushed the price to a new local low below $1,000, marking a significant shift in momentum.

The price has since bounced back to around the $1,600 range, but this region presents a major resistance zone. The $1,600 to $1,730 area has proven to be a tough barrier for MKR in the past. This level has acted as resistance since February 2022 and was retested as recently as December 2024 before the price once again fell to new lows.

Additionally, MKR has faced challenges at the 78.6% Fibonacci retracement level over the past few months, which has further added to the skepticism surrounding its long-term price potential. The inability to hold above this level suggests that the current rally might be short-lived.

Lack of Strong Bullish Signals

While the rise in MKR’s price has been accompanied by a spike in daily active addresses and network growth, which are typically bullish signals, there are still several red flags. One of the most concerning factors is the continued capital outflows from the Maker protocol. The Chaikin Money Flow (CMF) indicator, which measures the buying and selling pressure in the market, has been in negative territory since August 2024. Currently sitting at -0.04, the CMF suggests sustained selling pressure and capital outflows, signaling that MKR could face downward pressure in the near future.

Moreover, the Moving Average Convergence Divergence (MACD) indicator has also shown bearish trends, although it is nearing a potential crossover into bullish territory. This means that while there is a chance for a temporary upward shift, the long-term trend still appears to be in the red.

Resistance at $1,750: A Key Threshold for Traders

One of the most significant hurdles for MKR is the resistance at $1,750, which is the upper boundary of the current price range. This level has been respected by the token in previous months, with multiple failed attempts to break past it. Traders should pay close attention to how MKR behaves as it approaches this resistance zone. If the price struggles to break through $1,750 and fails to establish a solid foothold above that level, a bearish reversal is likely.

A glance at the three-month liquidation heatmap from Coinglass shows that there are clusters of liquidations just above the $1,600 mark, extending up to $1,755. This overlap with the resistance zone suggests that selling pressure could intensify as the price hits this critical level. Traders who are holding MKR may want to consider taking profits as the price nears this threshold to avoid being caught in a potential downturn.

What’s Next for MKR: Caution is Key

For those who are holding MKR, it might be wise to consider reducing exposure as the token nears its resistance zones. While the recent 60% price surge may seem enticing, the risk of a reversal looms large. Traders should avoid rushing into short positions immediately but should monitor lower timeframes for signs of weakening momentum. A breakout beyond $1,800 and a retest of that level as support could provide some hope for those looking to ride the rally further. In such a scenario, a move towards the $2,400 mark could become a real possibility.

However, until that happens, the prevailing sentiment in the market suggests caution. With a bearish structure still in play on the weekly chart and resistance just overhead, MKR could face another round of selling pressure in the coming days.

In conclusion, while the recent surge in Maker’s price has been impressive, there are multiple signs pointing to a potential reversal. Traders should closely monitor the resistance levels and be ready to take profits if the price shows signs of stalling. For now, patience and caution are key for anyone involved in the MKR market.