Siren [SIREN], a standout altcoin in terms of gains, has once again extended its impressive rally. In the last 90 days alone, the asset has surged by around 2,450%, with an additional 11% increase in the past 24 hours.
While this surge may attract significant investor attention, it comes with inherent risks. The market fundamentals do not align with the current trading activity that is propelling these gains.
Deteriorating On-chain Fundamentals
The number of holders of the AI agent token SIREN has seen a decline after reaching an all-time high of 41,570. Since hitting this peak, the holder count has been on a downward trend.
Within a week, the network lost approximately 2,200 holders, dropping to 39,390 according to CoinMarketCap.
A decrease in holders usually results in an increase in the circulating supply of an asset in the market, which can exert downward pressure on the price, especially when demand weakens.
SIREN has already shown signs of this trend, with its market capitalization decreasing by $490 million. Typically, such a decline would impact price action negatively.
Nevertheless, SIREN has defied conventional wisdom and continued its upward trajectory. Analysis suggests that this divergence introduces significant risks.
What is Fueling the Rally?
Despite weakening fundamentals, perpetual traders have largely been driving the rally by increasing their long positions.
Long trades occur when traders anticipate price increases. In the last 24 hours, the cumulative Taker Buy/Sell Ratio on centralized exchanges has remained above 1, with a reading of 1.05, indicating a dominance of buying pressure.
Simply put, a Taker Buy-dominated market implies that the volume of long trades surpasses short trades within the observed period.
During the same period, short traders experienced greater losses compared to long traders. Data from CoinGlass liquidations shows that approximately $817,000 in short positions were liquidated, in contrast to about $319,000 in long liquidations.
These imbalances in liquidations and volume dynamics indicate that long traders currently have control over the market and are driving prices higher.
The Risk: Potential Trap
Despite the ongoing rally, indications suggest that a potential trap may be forming for bullish perpetual traders. Market conditions could shift rapidly.
The Funding Rate has begun to turn negative, even as prices continue to climb. Currently, the Funding Rate stands at -0.0687%, indicating a rise in short positions and a gradual shift towards bearish sentiment.
If this trend persists, prices could eventually respond to the increasing bearish pressure. In such a scenario, SIREN may reverse its course and decline from its current levels, erasing a portion of its recent gains.
Final Summary
- SIREN continues its rally despite a decrease in holders and a $490 million market capitalization drop.
- The rally is being driven by perpetual markets, but early signs of weakness are starting to emerge.
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