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Stellar (XLM) is facing a turbulent market environment, as recent data reveals a $130 million drop in Open Interest, signifying weakening momentum.
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As social dominance decreases from 3.13% to 1.73%, it highlights diminishing interest and a potential shift in market focus away from Stellar.
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According to analysts at COINOTAG, the current Money Flow Index indicates overbought conditions, and unless buying pressure revives, XLM may descend to $0.28.
This article analyzes the recent decline in Stellar’s market metrics, focusing on Open Interest and social dominance, amid changing investor sentiment.
Stellar Market Dynamics: Open Interest Sinks
As of November 24, Stellar’s (XLM) Open Interest (OI) surged to an all-time high of over $339 million, largely influenced by a parallel rise in Ripple (XRP) prices. However, this bullish atmosphere has swiftly pivoted, with the OI plummeting to $209 million—a stark $130 million decrease.
This significant contraction in Open Interest indicates that derivatives traders are closing their positions, revealing a possible shift in market sentiment. A related decline of 10% in XLM’s price over the last 24 hours further corroborates this bearish trend.
The reduction in Open Interest suggests a corresponding decline in buying pressure within the derivatives market. Should this downward trend persist, XLM might struggle to maintain its price above the critical threshold of $0.45.
Stellar Open Interest. Source: Santiment
Further compounding the bearish outlook, Stellar’s social dominance has noticeably decreased in recent days. This metric provides insight into the relative attention that XLM garners compared to other digital assets. A higher dominance percentage typically signifies increased interest; however, a decline—from 3.13% to 1.73%—suggests a lack of engagement from the crypto community.
This downturn in social activity could result in diminished buying momentum, potentially leading to further price drops for Stellar.
Stellar Social Dominance. Source: Santiment
XLM Price Outlook: Potential Regression to $0.28
The combination of declining Open Interest and a fall in social dominance raises concerns over Stellar’s ability to maintain recent price levels. The Money Flow Index (MFI), which gauges market momentum, has indicated an overbought status, falling below the critical threshold. Historically, when MFI surpasses 80, it signals that an asset may be overextended.
If the MFI continues to trend downwards, it suggests that XLM’s price could indeed retract to $0.28.
Stellar Daily Analysis. Source: TradingView
Nevertheless, should XLM find renewed buying interest in both the derivatives and spot markets, it could stabilize above the low support at $0.22. A significant break below this level could trigger further selling, potentially pushing prices down to $0.17. Alternatively, should bullish sentiment return, a price recovery to $0.64 may become feasible.
Conclusion
In summary, Stellar currently faces challenges characterized by decreasing Open Interest and social dominance, alongside overbought conditions as indicated by the MFI. Without a shift in market dynamics or a resurgence in buying pressure, a retreat in XLM’s price to $0.28 seems likely. The future performance of Stellar will depend heavily on how traders react to these emerging trends and market sentiment.
