Monero (XMR), the popular privacy-focused cryptocurrency, shocked the crypto markets this week by surging over 50% within 24 hours. The spike came following massive capital inflows linked to a hacker converting over 3,500 Bitcoin—worth approximately $330 million—into XMR. While the price rally captured widespread attention, on-chain data and technical indicators now raise serious doubts about whether the surge is sustainable in the short term.

The abrupt rise began after on-chain sleuth and security analyst ZachXBT flagged suspicious activity involving a known hacker address. This entity reportedly funneled the funds through several exchanges, exchanging BTC for XMR in what appeared to be a clear attempt to obscure the transaction trail using Monero’s built-in privacy features.

This massive liquidity injection caused a supply shock in XMR’s spot markets, pushing its price from around $220 to over $330 in a matter of hours. However, as quickly as it spiked, the price began to correct. By press time, XMR had pulled back nearly 17%, with analysts warning that further downside could be on the horizon.

Weak Market Sentiment Hints at Trouble Ahead

Despite the initial price rally, sentiment in the derivatives market turned sharply bearish. The OI-weighted funding rate—a measure that compares open interest with funding costs—dropped to -0.5757%, its lowest level this year. This suggests that a large number of traders are opening short positions, betting on a price reversal.

Such a steep decline in funding rate is rare and usually signals a lack of conviction among bulls. It also coincided with a staggering 3,200% increase in trading volume, indicating panic buying followed by a rise in sell-side pressure. When funding turns negative while volume spikes, it often precedes heightened volatility and price corrections.

Technical Indicators Show Overheated Conditions

Further compounding the issue is Monero’s Relative Strength Index (RSI), which soared to 83.67—well above the “overbought” threshold of 70. The RSI is a momentum oscillator that traders use to determine whether an asset is due for a correction. A reading this high typically signals that a pullback is imminent as buyers exhaust their momentum.

Meanwhile, the Chaikin Money Flow (CMF), which measures buying and selling pressure based on both price and volume, showed a decline from 0.34 to 0.22. Although the CMF remains in positive territory—indicating net inflows—the rapid decline implies that bullish momentum is weakening and bears are beginning to take control.

Key Levels to Watch

On the charts, XMR has entered a critical resistance zone near $284.88. This level has historically acted as a cap on price growth and is currently pushing the price lower. If XMR fails to reclaim this zone, a further drop to $231.96 is likely. This is the next major support level and could provide a temporary bounce.

However, if selling pressure continues and this support is breached, the price may fall even further toward $199.40—a level Monero recently broke out from. A return to this consolidation range would effectively erase the rally fueled by the hacker-related inflows.

Temporary Pump or Trend Reversal?

While some bullish traders argue that Monero’s privacy utility could support a long-term uptrend, the current market dynamics suggest otherwise. The recent surge lacks organic growth indicators such as rising user adoption, improved network activity, or fundamental product developments.

Instead, the rally appears to be a reaction to an unusual, one-off liquidity event. This makes it highly vulnerable to reversal, especially as short interest builds and technical indicators flash warning signs.

Final Thoughts

Monero’s sudden 50% rally may have grabbed headlines, but investors should remain cautious. The price spike was driven not by market fundamentals but by anomalous activity from a hacker. While this event introduced temporary buying pressure, technical signals suggest the move is unsustainable.

With rising short interest, a declining CMF, and an overbought RSI, Monero appears poised for a broader correction unless significant positive news shifts the sentiment. For now, those considering entry positions may want to wait for more favorable technical confirmation before jumping in.

In summary, while Monero’s privacy features continue to attract niche demand, the current rally appears speculative and short-lived. Investors are advised to tread carefully and monitor the $231.96 and $199.40 support levels closely in the coming days.