Stellar's support level at $0.39 aligns with important Fibonacci levels, signaling oversold conditions and recovery potential.
The Long/Short XLM ratio shows bullish trader confidence despite falling trading volume and high market volatility.
At press time, Stellar [XLM] is trading at $0.3728, reflecting an 8.28% drop in 24 hours and a 10.36% drop over the past week.
Despite short-term losses, analysts believe this cryptocurrency is approaching a crucial support level at $0.3851, which could pave the way for a strong recovery.
This support zone has previously attracted buyer interest, as noted in a recent analysis. Future bullish targets are proposed at $0.6396 and $0.8278, providing significant growth potential if the price successfully reverses from the current downtrend.
Maintaining the $0.3851 level will be crucial for any potential bullish recovery to genuinely occur.
See also: Utility Coins Dominating the Market – XRP, XLM, ADA, HBAR, IOTA
Source: X
Technical indicators suggest an oversold condition
The recent price drop comes amid an overall corrective trend after a significant surge at the end of November.
Fibonacci retracement analysis identifies the support level of $0.3851 aligning with the 0.786 retracement level, often signaling an oversold condition.
Additionally, the MACD (12, 26) has formed a bearish crossover, with the MACD line falling below the signal line. The negative histogram further confirms short-term bearish momentum.
Source: TradingView
However, technical analysts suggest that stable support could be a launchpad for a bullish reversal if momentum indicators turn positive in the short term.
Derivatives data shows an upward trend despite declining activity
The XLM derivatives market shows a decrease in activity, with trading volume down 31.62% to $844.20 million and open contracts down 14.73% to $168.74 million.
Despite this decline, the Long/Short ratio on Binance and OKX shows an upward trend. Accounts on Binance show a ratio above 2.0, indicating that traders prefer long positions over short ones.
Source: Coinglass
Liquidation data, however, indicates the potential for increased volatility, with $3.58 million in liquidations over the past 24 hours, primarily affecting long positions.
This imbalance suggests confidence among traders but emphasizes the importance of caution, as the market remains highly reactive.
On-chain data and broad ecosystem metrics
On-chain data from DeFiLlama reveals that Stellar's Total Value Locked (TVL) currently stands at $46.53 million, down 4.21% in the last 24 hours.
The Stellar ecosystem boasts a stablecoin market capitalization of $143.09 million and has raised $3 million, highlighting its utility in DeFi.
As the market awaits confirmation of a reversal, Stellar's ability to maintain support at $0.3851 may determine its next move.
With a circulating supply of 30 billion XLM, this cryptocurrency has a market capitalization of over $11.53 billion. This presents growth potential if recovery expectations materialize.