Home Altcoins News Stellar Price Dips 7% as Open Interest Drops and Transaction Activity Declines

Stellar Price Dips 7% as Open Interest Drops and Transaction Activity Declines

XLM price prediction

Stellar (XLM) has experienced a notable dip of 7% as the cryptocurrency market continues to face challenges, with the token’s price slipping alongside a decline in futures open interest and a fall in transaction volume. The sentiment within the broader crypto space has soured recently, contributing to a difficult environment for Stellar and other altcoins. As Bitcoin tumbles to new lows and the overall market cap shrinks, XLM’s price has found it increasingly difficult to maintain momentum above key psychological levels, including the $0.50 mark.

Declining Futures Open Interest Signals Worsening Market Sentiment

One of the key factors behind Stellar’s recent struggles is the drop in futures open interest, which is an important indicator used to gauge the strength of market sentiment. According to data from CoinGlass, the open interest in Stellar futures has fallen to $224 million, down from its high of $307 million earlier this year.

Futures open interest is a measure of all outstanding futures contracts in the market, both calls and puts. A healthy increase in open interest typically signals confidence in the asset’s price direction, and when open interest declines, it often indicates weakening trader interest. This downturn suggests that market participants are becoming less optimistic about XLM’s near-term price prospects.

While some contrarian traders see a decline in open interest as a potential buying opportunity—given that it sometimes precedes a rally—XLM has yet to show signs of a strong reversal. The asset’s futures market, which had shown promise in the past, is now reflecting a shift in investor sentiment as broader market conditions continue to deteriorate.

Falling Transaction Volume: A Worrying Trend for Stellar

In addition to the decline in open interest, Stellar’s on-chain data paints a grim picture. Weekly transactions on the Stellar network have seen a significant drop, from a peak of over 90 million transactions in 2023 to less than 40 million. This reduction in activity could point to lower user engagement and reduced demand for the token, further impacting its price.

Transaction volume is often seen as a key indicator of the strength of a blockchain’s ecosystem. A decrease in the number of transactions could indicate a lack of enthusiasm among users and developers, potentially signaling underlying weaknesses in the network’s adoption or utility. For Stellar, this drop in weekly transactions aligns with the recent price downturn, as lower network activity typically translates to reduced buying pressure on the token.

Technical Analysis: Mixed Signals for Stellar Price

The technical outlook for XLM shows a mix of bullish and bearish signals. On the positive side, the price has been supported by the 50-day and 100-day moving averages, providing some stability in the face of recent volatility. Additionally, between December 2 and December 31, XLM formed a falling wedge chart pattern, which is often seen as a bullish signal when broken to the upside. The coin did experience a breakout earlier in January, suggesting that a recovery could still be possible.

Moreover, XLM may be forming a small bullish flag pattern. This type of chart pattern consists of a strong price movement followed by consolidation, indicating that the token could potentially continue its upward trajectory once it clears its current resistance.

However, there are significant challenges ahead for Stellar. The price has faced resistance at the $0.4850 level, preventing it from pushing higher. If XLM cannot overcome this resistance, it could continue to struggle and face further price declines.

Key Support Levels: What’s Next for Stellar?

On the downside, XLM’s price has strong support at the 50-day moving average, currently sitting at around $0.3160. A drop below this level could trigger further losses, potentially bringing the price closer to the 100-day moving average at $0.3163. If the price fails to hold these levels, it could suggest a deeper downtrend, putting further pressure on the token’s price.

What Investors Should Watch

For Stellar to regain positive momentum, the token needs to break through its current resistance and show signs of a sustained recovery in both transaction volume and open interest. If the price manages to clear the $0.4850 resistance level and holds above key support levels, it could potentially move toward the psychological $0.50 mark. However, if it fails to maintain support and continues to see declining open interest and transaction activity, further downside may be inevitable.

Investors should remain cautious and keep a close eye on both the technical indicators and broader market conditions. With the crypto market sentiment continuing to sour and many altcoins struggling, it remains to be seen whether Stellar can recover in the near future.

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Julie J

Julie is a renowned crypto journalist with a passion for uncovering the latest trends in blockchain and cryptocurrency. With over a decade of experience, she has become a trusted voice in the industry, providing insightful analysis and in-depth reporting on groundbreaking developments. Julie's work has been featured in leading publications, solidifying her reputation as a leading expert in the field.

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