According to CoinDesk, TIA, the native cryptocurrency of the data availability blockchain network Celestia, has seen a 25% increase to $7.30 this week. This marks the best performance among the top 100 digital assets by market value. Despite the ongoing price surge, traders appear skeptical and are taking bearish bets by shorting perpetual futures tied to the cryptocurrency, as indicated by funding rates tracked by CoinGlass.
Average funding rates across exchanges turned negative over the weekend and have since dropped to -0.1231%, reaching levels last seen in January. This suggests that the bias for bearish bets is the most pronounced it has been in six months. Funding rates, calculated and collected from traders every eight hours, represent the cost of holding bullish or bearish bets. A negative rate implies that traders with short positions, betting on a price drop, are paying a funding fee to longs. This happens when there is a high demand for short positions relative to long positions.
The bias for shorts amid a price rally could be a classic case of recency bias, with trades placing more weight on TIA's recent price crash than other significant developments. TIA's latest bounce follows a five-month downtrend that saw prices slide 80% from $21 to less than $5. As such, it's not surprising to see traders sell the bounce.
However, traders might be overlooking Celestia's role as a data availability layer for layer 2 networks like the booming permissionless liquidity layer for Web3 trading, Orderly Network. This could mean the price bounce could be sustainable. Celestia, a modular blockchain, separates consensus from execution, enhancing scalability. It acts as a storage system for data used by rollups and layer 2 networks, helping them become faster and handle more transactions.
Orderly Network, a permissionless liquidity layer and infrastructure provider for Web3 trading built on the Near blockchain, uses Celestia for data availability. On July 5, Orderly Network's cumulative trading volume reached a record $6.2 billion, with cumulative net fees exceeding $6.6 million while accounting for 40% of the total data posted on the Celestia network.
Furthermore, the bias for short positions could catalyze a further price rise. The funding fee that traders holding shorts are currently paying will become a burden if prices remain resilient, eventually forcing them to square off their bearish bets. This could, in turn, bump up prices in what is known as a short squeeze rally.