Following the positive momentum observed on Christmas Eve, Toncoin [TON] has been trading in a sideways pattern. Consequently, after reaching a peak of $6, TON has retraced to $5.6.
The absence of a noticeable uptrend in TON’s value has drawn attention from analysts. Notably, CryptoQuant expert Joao Wedson has highlighted the dwindling interest in Swaps as a key element impacting the altcoin.
Reduced Interest in Swaps
In his examination, Wedson noted a significant decrease in the volume of swaps conducted on the Toncoin network’s decentralized exchanges.
He pointed out that the daily average user count on STON.fi had plummeted to 13,300, while on DeDust, it stood at 5250.
This marks a substantial decline from the activity levels seen in September, where the altcoin witnessed almost 200,000 daily users across the two platforms.
The drop in user engagement can be attributed to three primary causes. Firstly, there has been a decrease in open positions, leading many traders to either liquidate their assets or reduce their exposure to decentralized exchanges.
Secondly, the TON community’s uncertainty stemming from legal complications following the founder’s arrest several months ago has impacted participation and trust in these network-based platforms.
Lastly, the broader cryptocurrency market has faced unfavorable conditions since the latest FED rate adjustments, prompting lower trading volumes and diminished risk appetite.
As TON experiences a decline in swap activities, investors are redirecting their focus from decentralized trading towards staking.
While this downtrend presents challenges, it also presents a strategic opportunity. Throughout history, times of low interest and market stagnation have proven to be favorable entry points for investors.
Implications for TON
Significantly, the sharp decrease in swap interest reflects a dwindling buying pressure as investors exhibit uncertainty regarding market trends, leading them to reduce their exposure to risks.
Consequently, Toncoin has witnessed a notable decline in demand amid market uncertainties, as investors opt for more cautious positions.
This decline in demand is reflected in TON’s stock-to-flow ratio. According to Santiment, the altcoin’s SFR has dropped to zero over the past three days.
When the SFR declines in this manner, it indicates an oversupply and reduced scarcity. The increased availability of the asset poses a risk of selling pressure, exerting downwards influence on prices.
Further confirming this oversupply, there has been a surge in TON’s supply on exchanges, with the exchange flow balance reaching 3459. This surge suggests that investors are moving more assets to exchanges.
In essence, TON is currently facing reduced demand, with investors adopting a more precautious approach. These actions underline a lack of confidence in the market, driving many to close positions and decrease their risk exposure.
In light of this scenario, if these circumstances persist, TON could potentially drop to $5.2. However, viewed as a buying opportunity by investors, the altcoin might break out of its consolidation range and rise to $6.1.