Bitcoin’s recent pause in the rally has cooled the market, removing overleveraged positions and stabilizing the costs associated with betting on price increases. But amid this backdrop, the native token of Solana-based decentralized exchange Raydium – RAY – remains hot.
As the only token with a perpetual annual funding rate that remains above 160%, RAY stands out among small-, mid-, and large-cap tokens, becoming the hottest token on the market, according to data from VeloData. This ratio shows that the RAY market is overloaded with long positions, and the leverage is heavily tilted towards bullish expectations.
In this scenario, even a small correction in price can shake the confidence of over-leveraged investors, especially those who entered late, leading to a massive sell-off of long positions. This often causes prices to fall further, creating a pronounced sell-off. Tokens with market capitalizations below $5 billion, such as RAY, are particularly vulnerable to volatility in the derivatives market.
Annual funding rates in small cap tokens
It’s easy to see why investors are willing to take the risk. Despite a 17% correction to $5.39, RAY is still up 67% this month, outperforming Bitcoin’s 35% gain.
The surge comes amid record trading activity on Raydium. According to data source Artemis, Raydium has seen $117.8 billion in trading volume this month, nearly double the total trading volume of Ethereum-based decentralized exchanges (DEXs), which totaled $66.8 billion. Raydium has also generated $175 million in transaction fees, compared to $168 million for Ethereum. Ethereum is the world’s largest smart contract blockchain.
It should be noted that much of the record activity on Raydium occurred earlier this month, largely due to the memecoin craze, which pushed trading volumes to all-time highs, creating a surge of interest in RAY. However, this excitement has since cooled off, weakening the foundation for a sustained RAY rally.