EOS started a downtrend 53 days ago and despite the recent 27% weekly gains, the altcoin is showing no signs of reversing. As a result, investors are questioning whether the previous top 5 cryptocurrencies have what it takes to shift after Daniel Larimer, chief technology officer of the developer behind EOS, resigned in late 2020.
The emergence of competitive proving grounds for smart equity contract platforms such as Solana (SOL), Polkadot (DOT), and Avalanche (AVAX) has likely affected this 2017-era project. One potential bullish catalyst may be the fact that Block.one, The company responsible for launching the EOS token, owns more than 160,000 Bitcoin (BTC) according to data compiled by BitcoinTreasuries.net.
EOS may not be the preferred smart contract network today, but there are a few working finance, games, exchanges, and decentralized social apps in the works. The transaction cost to the user is either minimal or is usually covered by the wallet or the application, which makes it a great competitor to non-fungible tokens (NFTs) and social networks.
Having deep pockets is an excellent strategy to get some heavy partnerships going and Block.one has taken in more than $300 million from investors, including Peter Thiel, Mike Novogratz and Alan Howard. The EOSIO developer is said to have made another $100 million cash injection into the bull run, which completed its seven-week testnet on September 15.
According to their website, all rookie exchange transactions and states will be validated and stored on EOSIO-based blockchains, enabling real-time audits and upholding integrity. Furthermore, the company expects to make $3 billion in assets available for bullish liquidity pools.
Retailers lost confidence after the September crash
To understand how confident traders are in EOS with the recent support hold of $4.50, one must analyze the perpetual futures data. This instrument is the preferred market for retail traders because its price tends to follow the regular spot markets. Unlike quarterly futures contracts, there is no need to manually renew contracts about to expire.
In any futures trading, longs (buyers) and shorts (sellers) are matched at all times, but their financial leverage varies. Thus, the exchanges will charge a funding rate to whichever side requires more leverage, and this fee is paid to the other side.
Neutral markets tend to show a positive funding rate of 0% to 0.03%, or 0.6% per week, indicating that long positions are driving it.
The data reveals a complete absence of bullish bets since September 19 when the cryptocurrency market plunged and caused EOS to drop from $5.25 to $4.15 in less than two days. However, the inability of the recent rally to boost leveraged long positions can be explained by the 25% drop in EOS price from the $6.40 peak just 30 days ago.
Top traders were sold off during the recent rally
To understand how arbitrage desks and whales may have set themselves up during this period, one must analyze the ratio of long to short stock traders.
This index is calculated using the consolidated positions of clients, including spot, perpetual and quarterly futures contracts. This metric provides a broader view of the effective net position of professional traders by collecting data from multiple markets.
As seen above, the 1.90 long to short ratio seen on October 3 is still favoring long positions but is the lowest since the September 19 price crash. Interestingly, the recent weekly gain of 27% occurred while the top traders were trimming their bullish trades. Meanwhile, the current 3.0 long to short index is just below the previous 30-day average at 3.50.
It seems that both retail and professional traders are not convinced that the launch of the bullish exchange will be enough to break the prevailing downtrend that started in mid-August. For EOS to regain investor confidence, it seems necessary to show that its decentralized applications are gaining momentum as competition gains in the NFT and DeFi sectors.
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