MKR, the native token of MakerDAO, has recently shown mixed signals in its price charts, leaving investors wondering if a significant rally is on the horizon. After breaking out of a descending channel, MKR’s price has struggled to gain upward momentum. As of now, the token is testing a crucial support level, and how it behaves in this zone could determine whether MKR will rally toward $3,900 or continue to face downward pressure.
MKR’s Struggle for Momentum
Despite breaking free from a long-standing descending channel, MKR has been slow to pick up steam. Compared to the broader market, MKR has only managed a modest 25% gain over the past month. In the last 24 hours, the token even saw a slight decline of 0.25%. However, there is still hope for a potential rebound, as market sentiment is suggesting a possible upward movement if MKR holds at its current support level.
At the time of writing, MKR was trading around $1,854, testing a significant support zone that has historically acted as a price floor. This range extends down to approximately $1,656, and if it holds, MKR could be poised for a rally toward $3,970. However, for this rally to materialize, MKR needs to maintain buying interest at these levels and stay within the defined support range.
Key Support Level: A Critical Factor
One of the factors that could propel MKR toward a rally is the buying interest around its current support level. Insights from IntoTheBlock’s In/Out of Money Around Price (IOMAP) metric have highlighted a strong buy order zone around $1,858. This metric shows where large numbers of MKR tokens are being bought or sold, helping traders gauge market sentiment and predict future price movements.
At the $1,858 level, 1,020 addresses have placed buy orders totaling 150,560 MKR tokens. This concentration of buying activity suggests that the support level could act as a catalyst for a price rebound. If this support zone holds, it could set the stage for MKR to move toward its target of $3,970, a level that many traders are eyeing.
Decreased Selling Pressure Signals Potential Reversal
In addition to strong buy orders, signs of weakening selling pressure are emerging. One of the key indicators of this shift is the drop in large transactions. Over the past period, large transaction counts have decreased significantly, falling from 124 to just 27. This decline in large transactions, coupled with a drop in transaction volume to just 9,270 MKR, suggests that the selling pressure is easing.
A reduction in large transactions often signals that the market is losing its bearish momentum. As MKR approaches its support zone, the fading selling pressure increases the likelihood of a price rally, especially if more buyers step in to capitalize on the support.
Derivative Market Sentiment: A Potential Barrier to the Rally
While there are signs of a potential rebound, the derivative market is sending mixed signals. More traders are currently betting on MKR’s decline, which could weigh on the token’s price. The long-to-short ratio, which measures the number of long positions versus short positions, is currently at 0.75. This is well below the neutral threshold of 1, indicating that a larger number of traders are taking short positions on MKR.
This bearish sentiment in the derivative market could reduce the chances of a price rebound from the current support level. For a rally to occur, there needs to be a shift in sentiment, with more traders placing long bets on MKR. If this happens, it could lead to a reversal in price, allowing MKR to move toward its target of $3,900.
What’s Next for MKR?
The key to MKR’s potential rally lies in its ability to maintain support at the $1,854 level and continue to attract buying interest. If the support zone holds and the market sentiment shifts, MKR could be on its way to higher levels. However, if the derivative market’s bearish sentiment continues, the chances of a price rebound may decrease.
Investors should keep a close eye on the price action in the coming days. A failure to break above resistance levels or a continued decline in the long-to-short ratio could signal further downside for MKR. On the other hand, if the support zone holds and buying activity picks up, MKR could make its way toward the coveted $3,900 mark.
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