• Shiba Inu has witnessed a rise in on-chain activity, yet market imbalances may hinder its breakout potential.

• Strong increases in SHIB’s burn rate and new addresses suggest renewed interest, but risks in the market dynamics remain evident.

• A significant quote from COINOTAG notes, “While Shiba Inu shows promising on-chain metrics, it’s crucial to monitor exchange inflows for direction.”

Shiba Inu experiences a surge in user engagement and on-chain metrics, but market dynamics pose challenges for sustained momentum and breakout potential.

Shiba Inu’s User Engagement Increases Amid Market Volatility

The recent surge in user engagement is underscored by a remarkable 1,361% increase in SHIB’s 24-hour token burn rate, which fuels optimism within the community. Currently priced at $0.00001309, SHIB has experienced a 3.95% drop over the prior day, yet price movements are not always the most immediate reflection of underlying demand.

On-chain metrics reveal considerable user activity, as evidenced by a 22.10% growth in new addresses and a 23.07% rise in active addresses over the last week. Notably, even zero-balance addresses surged by 31.41%, indicating a mix of new user inflows and re-engagement from previously inactive wallets.

Historically, such increases in user activity precede periods of price volatility. The capacity for this trend to translate into a sustained price rally hinges largely on participation from larger investors, including whales and institutional players. Nevertheless, this organic user growth presents a solid foundation for potential upside.

Source: IntoTheBlock

Technical Analysis: Cup and Handle Formation in Focus

On the technical front, SHIB appears to be presenting a bullish cup and handle pattern on its price chart. This is characterized by a potential neckline resistance currently at $0.00001411. A confirmed breakout above this threshold could energize upward price momentum toward a target of around $0.00001709.

However, traders should note the significance of the support level at $0.00001051. A fall below this price could invalidate the bullish pattern and potentially lead to additional decline. Hence, the following sessions are crucial for assessing whether SHIB can sustain its upward momentum or if it will encounter renewed selling anxiety.

Source: TradingView

Market Sentiment: Analyzing SHIB’s Position

While the on-chain metrics provide a positive outlook, the overall market scenario may not be as favorable. The slight decline in exchange reserves of 0.12% over the past week suggests reduced selling pressure and may imply accumulation by long-term holders. Conversely, the 24-hour Netflow saw a dramatic plunge of 157.97%, indicating a rush to deposit SHIB, often an intent to sell.

Source: CryptoQuant

Additionally, liquidation data shows a noteworthy bias towards long positions, with long liquidations amounting to $499K, compared to just $12K in shorts. Such an imbalance raises the potential for sudden market corrections, especially if a breakout fails to materialize.

Conclusion

In summary, while Shiba Inu’s increase in burn rate and address activity indicates favorable on-chain sentiment, underlying market data suggests caution. For SHIB to establish a solid breakout, the price must exceed $0.00001411 accompanied by robust trading volume and continued user inflows. Until key price levels are validated, prudence may well be the best strategy.