EOS (EOS) started a downward trend 53 days ago and despite the recent weekly increase of 27%, the altcoin is showing no signs of reversal. As a result, investors are wondering whether the former top 5 cryptocurrency has what it takes to turn around after Daniel Larimer, CTO of the development firm behind EOS, stepped down in late 2020.
The emergence of competing proof-of-stake smart contract platforms like Solana (SOL), Polkadot (DOT), and Avalanche (AVAX) may weigh on this 2017 project. A potentially bullish catalyst could be the fact that Block.one, the company responsible for introducing the EOS token, owns over 160,000 Bitcoin (BTC), according to BitcoinTreasuries.net.
EOS might not be the smart contract network of choice of the day, but it does have a handful of working finances, games, exchanges, and decentralized social apps running. The transaction costs for the user are either negligible or usually covered by the wallet or application, making it a great contender for non-fungible tokens (NFTs) and social networks.
Having deep pockets is an excellent strategy for winning some serious partnerships, and Block.one raised over $ 300 million from investors including Peter Thiel, Mike Novogratz, and Alan Howard. The EOSIO developer reportedly provided another $ 100 million injection of cash to Bullish Exchange, which completed its seven-week testnet on September 15.
According to its website, all Bullish exchange transactions and states are validated and stored on EOSIO-based blockchains, allowing for instant verification and integrity maintenance. In addition, the company expects to add $ 3 billion in assets to the Bullish liquidity pools.
Retailers lost confidence after the September crash
To understand how confident traders are that EOS will hold the recent support of $ 4.50, one should analyze futures data for perpetual contracts. This instrument is the preferred market for retailers as its price tends to mimic the regular spot markets. Unlike quarterly futures, there is no need to manually extend the contracts that are nearing expiration.
In any futures contract trade, longs (buyers) and shorts (sellers) are merged at all times, but their leverage varies. As a result, exchanges charge a funding rate from the side that requires more leverage, and that fee is paid to the other side.
Neutral markets typically have a positive funding rate of 0% to 0.03%, which equates to 0.6% per week, suggesting that long positions are paying these off.
The data shows that there have been no bullish bets since September 19, when the cryptocurrency market slumped and EOS fell from $ 5.25 to $ 4.15 in less than two days. However, the inability of the recent rally to drive leveraged longs can be explained by the fact that EOS price was 25% below its high of $ 6.40 just 30 days ago.
Top traders sold during the recent rally
To understand how whales and arbitrage desks might have positioned themselves during this time, one should analyze the long-short ratio of top traders.
This indicator is calculated using clients’ consolidated positions, including spot, perpetual and quarterly futures contracts. This metric provides a broader view of the professional trader’s effective net position by gathering data from multiple markets.
As shown above, the long-to-short ratio of 1.90 on October 3rd still favors long positions, but is the lowest since the September 19th price crash. Interestingly, the last 27% weekly gains happened as the top traders reduced their bullish positions. Meanwhile, the current long-to-short indicator of 3.0 is slightly below the previous 30-day average of 3.50.
Both retailers and professional traders seem unconvinced that the bullish market launch will be enough to break the prevailing bearish trend that began in mid-August. In order for EOS to regain investor confidence, it seems important to show that its decentralized applications gain in importance as competition in the NFT and DeFi sectors gain ground.
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