Shiba Inu: How derivative traders could fuel SHIB losses

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  • SHIB outflows from derivative exchanges have reached the highest level in two weeks. 
  • A drastic drop in funding rates and open interest shows traders are exiting the market due to uncertainty.

As a seasoned analyst with over a decade of experience in the ever-evolving world of cryptocurrencies, I can’t help but notice the telltale signs that SHIB derivative traders might be feeling the pinch and considering a strategic exit. The surge in outflows from derivative exchanges, coupled with the drop in open interest and funding rates, paints a picture of uncertainty and fear creeping into the market.

At the moment of reporting, the cryptocurrency market was experiencing a downturn with Bitcoin [BTC] and many other altcoins seeing small decreases. Shiba Inu [SHIB], unfortunately, fell victim to this bearish trend, dropping by 3% over the past 24 hours to currently trade at $0.0000185.

Even though SHIB has seen a decline, it’s important to note that it has gained 26% over the past 30 days. Nevertheless, the derivatives market seems to indicate a change in investor sentiment that may lead to additional declines.

Are SHIB derivative traders deleveraging? 

According to AMBCrypto’s examination, there has been a significant increase in Shiba Inu (SHIB) withdrawals from derivative markets – the highest level seen in two weeks. Specifically on September 21st, SHIB withdrawals surpassed deposits by the largest margin since early this month.

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This suggests that traders could be winding up their current trades to reduce potential losses due to forced closures (liquidations).

At the same moment, as reported by Coinglass, there’s been a noticeable decrease in open interest from $60 million down to $55 million, which aligns with an increase in derivative exchange withdrawals.

The information presented indicates that traders are exiting the market due to uncertainties following SHIB’s upward trend not holding up. These vacated positions might have triggered a long squeeze, contributing to the price decrease.

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21st October marked a significant spike in Shiba Inu’s funding rate, which peaked at 0.0207%, its highest point since June. This surge was due to numerous traders opting for long positions. However, as of the present moment, the funding rate has dropped dramatically to 0.0046%.

Reduced funding rates, along with decreased activity on trading platforms (open interest) and significant withdrawals from derivatives exchanges, indicate that long-term investors are leaving the market.

This demonstrates a reduction in debt (deleveraging), potentially causing Shiba Inu (SHIB) prices to fall in the near future since long-term investors might choose to sell their holdings to wrap up their positions.

Shiba Inu price analysis 

Shiba Inu’s price movement has been confined within an upward-sloping channel pattern. Lately, the value has dipped down to the bottom line of this channel, and if it falls beneath it, there might be a shift towards a descending trend for SHIB.

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Right now, SHIB is holding strong near the $0.00001822 mark as a key level of support. Should this support weaken, there’s potential for the price to slide down towards the 0.236 Fibonacci retracement level, which translates to around $0.0000168.

As a crypto investor, I’ve noticed that the Relative Strength Index (RSI) for SHIB has dipped to 56, indicating a decrease in buyer enthusiasm. Yet, sellers haven’t taken full control just yet, suggesting there might be an opportunity for SHIB to rebound. If this index drops below 50, however, SHIB could experience a more significant decline.

Read Shiba Inu’s [SHIB] Price Prediction 2024–2025

The histogram bars on the Awesome Oscillator have now turned red, implying that the bears might be growing stronger.

With growing bearish indicators, there’s been a significant surge in whale activity for Shiba Inu. This rise has followed a more than 200% increase in large transaction volumes worth approximately $62 million. If these whales are indeed buying, it might signal the resumption of an upward trend for SHIB.

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2024-10-23 01:11