During the last week, the collective market capitalization of memecoins experienced a 17% decrease, reaching $94 billion according to CoinMarketCap. FLOKI, ranked as the sixth-largest memecoin by market cap, has reflected these negative trends by currently trading at $0.000155, marking a three-week low after a 5% decline in 24 hours.
This price drop has triggered increased activity in both spot and derivative markets, potentially indicating heightened volatility on the horizon.
Continued Engagement of Derivative Traders
Recent data from Coinglass highlights the sustained interest of derivative traders in FLOKI despite the prevailing bearish sentiment. Open Interest (OI) has grown from $21 million at the start of the year to $28 million, showcasing ongoing activity in this space.
The data indicates that while some traders have maintained their positions on FLOKI, there is a possibility of an influx of short traders joining the market, which typically leads to a negative market outlook.
Furthermore, funding rates have notably decreased to 0.0028%, suggesting that long traders are hesitant to pay substantial fees to retain their positions.
Examining FLOKI’s Price Trend Amidst Selling Pressure
The current four-hour chart analysis of FLOKI implies that the memecoin might be oversold as the Money Flow Index (MFI) hit 21. This oversold condition could potentially signal a forthcoming reversal if selling pressure subsides.
However, a bullish reversal might be delayed as the 50-day Simple Moving Average (SMA) descends below the 150-day SMA, indicating a prolonged bearish phase for FLOKI.
Intensified selling has led to a bearish breakout from FLOKI’s consolidation range, underscoring the importance of monitoring the support level at $0.000145, as breaching this mark could lead to a new monthly low.
Insights from On-Chain Data
An analysis of on-chain activity through IntoTheBlock suggests that despite the price dip, FLOKI whales have refrained from capitalizing on the lower prices, with a 14% reduction in large transactions noted.
Meanwhile, there has been a marginal increase in significant holder positions. Yet, the profitability of wallets holding FLOKI has decreased, potentially prompting further sell-offs to limit losses.
Although there are positive signals like a slight uptick in network activity, hinting at a promising long-term outlook for the altcoin.
Anticipating a Potential Short Squeeze
FLOKI’s long/short ratio has suggested a surge in short selling activity, indicating a prevailing bearish sentiment with the ratio nearing a weekly low at 0.856.
In the event of an unexpected upward move by FLOKI, a short squeeze scenario may unfold where the closure of short positions could prompt buying pressure, facilitating a potential recovery for the memecoin.