Meme-based digital currencies have faced significant downward pressure recently, with a collective market capitalization drop of 15% to $97 billion over the past seven days. Bonk [BONK], currently positioned as the fourth largest meme coin, has not been immune to this bearish trend, witnessing a substantial 21% decrease in value within a week.
The ongoing negative trend in the meme coin market is likely to persist, given the apparent lack of interest from buyers in the spot market and reduced participation from derivative traders speculating on its future performance.
Analysis of BONK’s Price Movement
Upon inspecting BONK’s daily trading chart, it is evident that the meme coin is currently trading within a descending parallel channel, signaling a sustained period of decline driven by increased selling pressure compared to buying activity.
Presently, BONK is testing a crucial support level at the midline of the channel, and a breach below this point could intensify the bearish sentiment. To initiate a potential bullish reversal, BONK must exhibit a strong rally beyond the upper trendline with substantial buying interest.
The Chaikin Money Flow (CMF) indicator residing in the negative territory indicates prevailing selling pressure, suggesting that BONK might be in a distribution phase. Similarly, the Money Flow Index (MFI) corroborates this bearish outlook, declining to 47, signifying a dominance of sellers in the market.
Diminished Speculative Positions Could Aggravate the Downtrend
Typically, a surge in derivative market activity indicates a high level of confidence among traders regarding future price movements. However, in the case of BONK, traders seem to be liquidating their positions.
As per data from Coinglass, BONK’s Open Interest has dwindled by 28% in a week to $14.12M, alongside a drop in 24-hour derivative trading volumes to $36M, the lowest recorded since the beginning of the year.
This decline in speculative interest might stabilize prices by reducing volatility, but the waning enthusiasm could promote negative market sentiment and weaken price dynamics.
Crucial Price Levels to Monitor
Recent days have witnessed the elimination of over $1M worth of BONK long positions, heightening the selling pressure. Despite these liquidations, multiple clusters below the current price could exert additional downward pressure.
The primary liquidation cluster is located at $0.0000273, followed by others at $0.0000270 and $0.0000267. If BONK descends to these levels, the ensuing liquidations are likely to reinforce the prevailing downtrend.
In contrast, the absence of significant liquidation clusters above the current price may impede upward momentum and result in consolidation within the existing range.