Home DeFi & NFT Shiba Inu Faces Pressure: How Derivative Traders Could Amplify SHIB Losses

Shiba Inu Faces Pressure: How Derivative Traders Could Amplify SHIB Losses

Shiba Inu

The cryptocurrency market is currently grappling with bearish trends, and Shiba Inu (SHIB) is no exception. Recently, SHIB saw a 3% drop in value over 24 hours, trading at $0.0000185. While it has risen by 26% in the past month, the latest movements in the derivatives market suggest a shift in trader sentiment that may lead to further losses for SHIB.

Outflows and Uncertainty in the Derivatives Market

Analysis from AMBCrypto indicates a significant increase in SHIB outflows from derivative exchanges, reaching the highest levels seen in two weeks. This trend suggests that traders are proactively closing their positions to mitigate losses, especially in light of recent volatility.

On October 21, the funding rate for SHIB peaked at 0.0207%, marking the highest level since June. However, this rate has since plummeted to 0.0046%, reflecting a sharp decline in trader confidence. The funding rate measures the cost of holding a position, and such a drastic drop typically signals that long traders are exiting the market.

Implications of Deleveraging

The recent spike in SHIB outflows coincides with a notable decrease in open interest, which fell from $60 million to $55 million. This trend indicates that many traders are not only leaving the market but are also potentially creating a long squeeze that exacerbates the price drop.

As traders close their long positions, the influx of sellers could push SHIB’s price even lower in the short term. The deleveraging process typically leads to increased selling pressure, which may further strain the price as traders rush to minimize their losses.

Technical Analysis of Shiba Inu

From a technical perspective, SHIB has been trading within an ascending parallel channel but is now approaching the lower boundary. Currently, the price is attempting to defend support at $0.00001822. If this support fails, SHIB could drop to the 0.236 Fibonacci level at around $0.0000168.

The Relative Strength Index (RSI) for SHIB has decreased to 56, indicating a waning interest from buyers. If the RSI drops below 50, it may signal a more pronounced downward trend, placing additional pressure on SHIB.

Moreover, the Awesome Oscillator has shown bearish momentum, as histogram bars have flipped to red, suggesting that sellers are gaining strength in the market.

Whale Activity and Potential Resurgence

Despite the current bearish indicators, there has been a notable increase in whale activity, with large transactions exceeding $62 million—an increase of over 200%. If these whales are accumulating SHIB, there may still be potential for a price recovery.

In the cryptocurrency market, whale activity often foreshadows price movements, as large investors can significantly influence market dynamics. Should these whales continue to buy, it could provide the necessary support for SHIB to resume its upward trajectory.

Conclusion

As Shiba Inu navigates a challenging market environment, derivative traders’ actions are pivotal. The current trends of outflows and reduced funding rates suggest a bearish sentiment that could amplify losses in the short term. However, the rise in whale activity offers a glimmer of hope for SHIB holders.

Investors will need to closely monitor market conditions, particularly the behavior of larger players and the technical indicators that could influence SHIB’s next moves. The balance between selling pressure from traders exiting their positions and potential accumulation by whales will ultimately determine SHIB’s future trajectory.

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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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