Friday, July 1

Professional traders cut their EOS longs, but retail FOMO and $ 50K + BTC could tip the balance


EOS started a downtrend 53 days ago and despite the recent weekly gain of 27%, the altcoin shows no signs of reversing. As a result, investors are wondering if the old top 5 cryptocurrency has what it takes to change after Daniel Larimer, CTO of the development company behind EOS, resigned in late 2020.

EOS price on Bitfinex in USD. Source: TradingView

The emergence of competing proof-of-stake smart contract platforms such as Solana (SOL), Polkadot (DOT) and Avalanche (AVAX) arguably weighed on this 2017-era project. A potentially bullish catalyst could be the fact that Block.one , the company responsible for the launch of the EOS token, owns more than 160,000 Bitcoin (BTC) according to data compiled by BitcoinTreasuries.net.

EOS may not be the smart contract network of choice of the day, but a handful of decentralized finance, gaming, exchanges, and social apps are running. The transaction cost for the user is negligible or is generally covered by the wallet or the application, which makes it a great competitor for non-fungible tokens (NFTs) and social networks.

The best decentralized apps on EOS. Source: DappRadar.com

Having deep pockets is a great strategy for getting some strong partnerships, and Block.one secured more than $ 300 million from investors, including Peter Thiel, Mike Novogratz, and Alan Howard. The EOSIO developer reportedly proposed another $ 100 million cash injection for the Bullish exchange, which completed its seven-week testnet on September 15.

According to their website, all Bullish Exchange transactions and statuses will be validated and stored on EOSIO-based blockchains, allowing instant auditing and maintaining integrity. Additionally, the company expects to make $ 3 billion in assets available to bullish liquidity pools.

Retail traders lost confidence after September slump

To understand how confident traders are that EOS has the recent support at $ 4.50, one must analyze the perpetual contract futures data. This instrument is the preferred market for retail traders because its price tends to follow the regular spot markets. Unlike quarterly futures, you don’t need to manually renew contracts that are nearing expiration.

In any futures contract trading, longs (buyers) and shorts (sellers) equalize at all times, but their leverage varies. Consequently, exchanges will charge a funding fee to the side that demands the most leverage, and this fee will be paid to the opposite side.

Neutral markets tend to show a positive funding rate of 0% to 0.03%, equivalent to 0.6% per week, which indicates that longs pay for it.

EOS perpetual futures 8 hour funding rate. Source: Bybt.com

The data reveals a complete absence of bullish bets since Sept. 19, when the cryptocurrency market crashed and caused EOS to tumble from $ 5.25 to $ 4.15 in less than two days. However, the inability of the recent rally to drive leveraged longs can be explained by the fact that EOS price is 25% below the peak of $ 6.40 just 30 days ago.

Top traders sold during the recent rally

To understand how whales and arbitrage desks may have positioned themselves during this period, one must analyze the long-to-short relationship of the major traders.

This indicator 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.

EOS long / short ratio of the main OKEx operators. Source: Bybt.com

As shown above, the 1.90 long-to-short ratio on October 3 still favors longs, but it is the lowest level since the September 19 price drop. Interestingly, the recent weekly gains of 27% occurred as major traders reduced their bullish positions. Meanwhile, the current indicator of 3.0 long to short is slightly below the previous 30-day average of 3.50.

Both retail and professional traders seem unconvinced that the bull market launch is enough to break the prevailing downtrend that began in mid-August. For EOS to regain investor confidence, it seems essential to demonstrate that its decentralized applications are gaining ground as competition gains ground in the NFT and DeFi sector.

The views and opinions expressed here are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trade movement involves risk. You should do your own research when making a decision.