Stellar (XLM), a cryptocurrency that competes with Ripple, has recently seen a significant price decline, falling below its critical $0.31 support level. This drop has raised concerns about a further plunge of up to 32%, potentially reaching as low as $0.19. As market uncertainty grows, traders and analysts are closely monitoring the asset’s performance and potential for continued downside.

Breaking Support and Price Decline

On February 25th, 2025, Stellar saw a sharp 14% drop, breaking the crucial $0.31 support level. This level had historically acted as a strong point of price reversal, making the recent breakdown particularly concerning. As a result, XLM was trading near $0.279, signaling that the bearish trend is gaining momentum. The daily trading volume surged by 85% during this period, indicating increased activity and potential panic selling as the market sentiment worsened.

Technical Analysis: 32% Decline Possible

Technical analysis suggests that the breach of the $0.31 support is a bearish signal for XLM. Closing a daily candle below this level has further confirmed the downtrend. With this support level now broken, experts believe there’s a high likelihood of XLM falling by another 32%, potentially reaching the $0.19 mark in the coming days. The asset’s breach of the 200 Exponential Moving Average (EMA) on the daily chart further reinforces the bearish outlook.

On-Chain Data and Market Sentiment

Despite the ongoing price decline, some long-term holders and investors appear to be undeterred by the market’s current bearish sentiment. On-chain data from Coinglass reveals that exchanges have seen an outflow of $7.10 million worth of XLM in the past 48 hours. Outflows in such a weak market environment may indicate that some investors are accumulating the token, which could create upward pressure if demand rises.

However, the situation is far from one-sided. Short-term traders have been quick to take advantage of the bearish trend by betting against XLM’s price. According to Coinglass, traders have built $3.42 million worth of short positions at the $0.306 level. These traders believe that the price won’t rise above this point, suggesting that they expect further declines in the short term.

Long vs. Short Positions

The current market sentiment is dominated by short positions. Traders are highly leveraged on the short side, reflecting the bearish outlook for XLM. Data from Coinglass also shows that long positions are significantly overleveraged, particularly around the $0.272 level. Traders who are betting on price increases are currently holding $802.5K worth of long positions, but many of these positions appear to be at risk if the bearish trend continues.

This mix of long and short positions is creating an interesting dynamic in the market. While long-term holders are more likely to employ a “buy the dip” strategy, traders who are shorting the asset are profiting from the downtrend. This scenario indicates a market that is divided, with investors split between taking advantage of the current dip and betting on further price drops.

Conclusion: What’s Next for Stellar?

As Stellar continues to struggle below the $0.31 support level, the odds of a 32% price drop to $0.19 are growing. The combination of technical analysis, on-chain data, and the dominance of short positions suggests that further downside is likely in the near future. While some long-term holders may view the current price drop as a buying opportunity, the market sentiment remains largely bearish. Traders should be cautious and monitor XLM’s movements closely, as volatility is expected to continue in the coming days.

In the meantime, the $0.31 level remains a crucial resistance point. If XLM fails to recover above this level, the bearish trend could persist, potentially leading to even lower price targets. As always, investors should exercise caution when dealing with volatile assets like XLM, particularly in uncertain market conditions.