Stellar (XLM), one of the leading cryptocurrencies, is currently struggling in a bearish market. After facing a significant drop of 14.5% in just 24 hours, the altcoin’s price has raised concerns among traders. As Bitcoin (BTC) and other cryptocurrencies are experiencing downward pressure, Stellar’s price is also feeling the effects. The critical question now is whether $0.2 will act as a strong support level for XLM, or if the altcoin will fall further.

What’s Behind the Drop in Stellar’s Price?

Stellar’s price struggles began after the broader cryptocurrency market took a hit, particularly Bitcoin, which dropped to $74,500 due to a global stock market decline. This market-wide downturn has created a ripple effect, pulling other altcoins like Stellar down as well. Over the past few weeks, Stellar’s price had attempted to rise but faced rejection at the $0.3 level, confirming that the bearish trend is still in play.

XLM’s current trading situation is quite critical. It’s now testing the $0.2 support zone, a level where the price may either stabilize or fall further. In recent months, XLM has been trapped in a narrow range between $0.25 and $0.30, but after recent price drops, it has failed to break past the $0.3 resistance. As a result, many traders are now looking to see whether the $0.2 support will hold.

Key Technical Indicators for XLM

The technical indicators for XLM paint a bearish picture. The 20-period and 50-period moving averages are both above the current price, signaling that the market sentiment is leaning towards selling rather than buying. Additionally, the Moving Average Convergence Divergence (MACD) indicator has recently shifted lower, indicating that the selling pressure is likely to continue.

One of the most concerning signals for Stellar traders is the Continuous Money Flow (CMF), which has been negative since March. This suggests that money is flowing out of the Stellar market, further reinforcing the bearish outlook.

Could $0.2 Hold for XLM?

At the time of writing, Stellar’s price is just below the $0.2 level, which is considered a key support zone. If XLM fails to hold above $0.2, it could quickly fall to lower support levels, such as $0.197 or even $0.162. On the other hand, if the $0.2 zone manages to provide support, there could be a minor bullish reaction, although traders should be cautious, as there is no clear sign yet that the price has bottomed out.

The Fibonacci retracement levels based on XLM’s recent price action suggest that $0.207 is a critical support level to watch. If the price fails to hold at this level, the market could see further declines. Traders should closely monitor these levels and wait for stronger confirmation of a reversal before entering long positions.

What About the Liquidity Levels?

Looking at the liquidation heatmaps for the past month, there’s a significant build-up of long liquidations around the $0.246-$0.26 range. This suggests that a lot of traders have been caught off guard as XLM dropped below this price. The next key zones for potential price action are $0.23 and $0.255-$0.265. If the price rebounds, these areas will act as resistance levels, making it difficult for XLM to break higher without further selling pressure.

Caution Remains for XLM Traders

For traders who are considering buying XLM at this point, patience is key. Although the price may seem attractive at these levels, it’s essential to wait for clear signs of stability before making any moves. The current market sentiment remains bearish, and trying to catch the bottom may not be the best strategy in such an uncertain environment.

In conclusion, Stellar (XLM) is facing a crucial test. The $0.2 support level is now under intense scrutiny, and whether it holds will likely determine the next direction for XLM. While a minor bounce may occur, the overall bearish sentiment remains strong, and traders should remain cautious and avoid making impulsive decisions.