XLM, the native cryptocurrency of the Stellar network, is facing a significant downturn as bearish signals dominate its price action. Following a breakdown of critical support levels, experts suggest a potential 35% drop, with the price possibly reaching $0.189 in the coming days. As the market sentiment shifts and traders position themselves accordingly, the outlook for XLM looks increasingly negative.

Current Price Momentum

At the time of writing, XLM is trading at approximately $0.297, representing a drop of over 12% in the last 24 hours. This significant decline in price, combined with a surge in trading volume—up 120% during the same period—indicates heightened market activity. The increase in volume typically signifies increased participation from traders and investors, with many possibly reacting to the asset’s bearish outlook.

The primary reason behind this negative sentiment is the recent price action on XLM’s daily chart, which has raised concerns about its future price direction. After testing the $0.311 support level multiple times, XLM has now broken through this crucial price level and closed a daily candle below it. This breach has led to the formation of a bearish trend, signaling that the price could continue its downward trajectory in the short term.

Technical Analysis and Potential Price Targets

Expert technical analysis suggests that XLM’s breakdown below the $0.311 support level is a critical signal of the asset’s impending decline. The asset’s inability to maintain this support suggests that further downward movement is likely. If the current trend persists, XLM could see a significant price drop of up to 35%, potentially reaching the $0.189 mark.

Before reaching this key level, XLM may find temporary support at around $0.25. However, if the asset fails to hold above this level, the price could continue its descent toward the $0.189 target. The breakdown of the support level also indicates that the bearish trend may accelerate, especially if the asset breaches the 200 Exponential Moving Average (EMA) on the daily chart. This EMA, which has been acting as a support level for XLM, could act as a strong indicator of further declines if breached.

The Role of Over-Leveraged Positions

Data from Coinglass, an on-chain analytics firm, reveals that market sentiment has shifted dramatically in favor of bearish positions. According to the XLM exchange liquidation map, short positions are dominating the market, with traders betting on the asset’s decline. As of recent data, traders holding short positions have over-leveraged their positions at the $0.3321 mark, representing a total of $6.75 million worth of short bets. This suggests that bears are firmly in control, and they are likely to drive XLM further downward if the price continues to stay below key support levels.

On the other hand, long positions seem to be losing momentum. At the $0.2821 mark, traders holding long positions are over-leveraged by $1.10 million. This over-leveraged state implies that traders betting on an upward price movement are struggling, with their positions at risk of liquidation if the bearish trend persists.

Short-Term Outlook for XLM

Given the current market dynamics, it seems likely that bears will continue to dominate XLM’s price action, pushing the token further down in the short term. The significant shift in market sentiment, combined with the breakdown of key support levels and the over-leveraged positions on both sides of the market, signals that the downward pressure on XLM may persist.

If the $0.189 target is reached, XLM could face even more significant selling pressure, further amplifying the ongoing bearish trend. Traders and investors will need to watch the 200 EMA closely for any signs of reversal, as this could indicate a potential bottom and the beginning of a recovery. However, without a shift in sentiment or positive catalyst, XLM’s price is likely to remain under pressure in the near term.

Conclusion

XLM’s recent price action and the market’s overall bearish sentiment suggest that the cryptocurrency is poised for further declines. With the asset breaking through key support levels, technical analysis indicates a potential 35% drop to $0.189. The dominance of short positions and the over-leveraged state of both short and long traders further solidifies the bearish outlook. Traders should remain cautious and monitor key support levels to assess whether a potential reversal or further decline is on the horizon.