Shiba Inu’s futures open interest drops to a six-month low amid price declines, reflecting decreased market activity and trader confidence in SHIB’s future price movements.
Points
- Shiba Inu’s futures open interest hits a six-month low.
- The decline in open interest reflects reduced market activity and confidence.
- Positive funding rates suggest continued demand for long positions.
- Key technical indicators provide insights into potential price rebound or further declines.
Shiba Inu’s （SHIB） derivatives market has seen a decline in activity in the past few weeks, reflected in its falling futures open interest, which now sits at its lowest level since February 14. This decline is due to the fall in the meme coin’s price. As of this writing, SHIB trades at $0.000014, a price level it last reached on March 1.
Declining Open Interest
According to Coinglass, SHIB’s futures open interest is $26 million. It has declined consistently since July 19, dropping by 51% in the past 16 days. An asset’s futures open interest refers to the total number of outstanding futures contracts that have not been settled. When it declines, it indicates a decrease in market activity and interest in the underlying asset. It is generally interpreted as a bearish signal, implying that traders are becoming less confident in the future price of the asset.
Positive Funding Rates
Despite the decline in futures open interest, SHIB’s predominantly positive funding rate across cryptocurrency exchanges suggests that this might not be entirely bearish for the meme coin. Funding rates are a mechanism used in perpetual futures contracts to ensure an asset’s contract price stays close to its spot price. When they are positive, it means more traders are buying the asset and expecting a price rally than those hoping for a decline, which is a bullish signal.
Technical Indicators and Price Predictions
SHIB’s Relative Strength Index （RSI）, assessed on a one-day chart, suggests a possible price rebound. At press time, the indicator’s value is 29.03. An asset’s RSI indicator measures its oversold and overbought market conditions. At 29.03, SHIB’s RSI suggests that the meme coin might be oversold and due for an upward correction.
However, readings from other indicators signal that the rebound might not happen in the near term. For example, SHIB’s price decline has been accompanied by a falling Chaikin Money Flow （CMF）. At press time, SHIB’s CMF is below zero at -0.15 and in a downtrend. This indicator tracks the flow of money into and out of an asset, and a CMF value below zero is a sign of market weakness.
Bearish Momentum
A falling price coupled with a declining and negative CMF suggests a strong bearish trend. The falling CMF implies more money is flowing out of the asset than into it, reinforcing the bearish trend and making it clear that selling pressure significantly outweighs buying pressure. If this trend continues, SHIB’s price could fall to $0.000012, a price level it last traded at on July 5.
Potential Upside
Conversely, if the market trend reverses and more liquidity begins to flow into SHIB than out of it, the meme coin might witness a rally, pushing its price to $0.000020. This level marks a critical resistance point, and a successful breach could signal a more sustained bullish trend.
Conclusion
Shiba Inu’s falling futures open interest and bearish technical indicators suggest a challenging outlook in the near term. While positive funding rates indicate some optimism among traders, the overall sentiment remains cautious. Investors should closely monitor SHIB’s technical indicators and broader market conditions to navigate this volatile market. Understanding these dynamics will be crucial for making informed trading decisions and managing risks effectively.
Explanation
- Open Interest Decline: The significant drop in SHIB’s futures open interest indicates decreased market activity and confidence.
- Positive Funding Rates: Despite bearish signals, positive funding rates suggest continued demand for long positions.
- Technical Indicators: RSI and CMF readings provide insights into potential price movements and market trends.
- Market Dynamics: Close monitoring of technical indicators and broader market conditions is essential for informed trading.