Arbitrum has a bearish bias in the higher term and short sellers could have an opportunity soon. The local highs on the daily chart could be retested this week, but will the bulls be able to overcome them?
The cryptocurrency market is never short of excitement and surprises, and this time, the focus is on Arbitrum, which has been battling a downward trend amid widespread weakness in the futures markets. This downward trend has led to the vast majority of ARB investors facing considerable losses.
During this month, Arbitrum has faced significant challenges, recording new lows on three occasions since the beginning of September. The downward pressure recently intensified when certain actors sold large amounts of ARB tokens on September 11. This has contributed to the growing lack of trust in Arbitrum due to its persistent disadvantages. As an example, Wintermute Trading deposited over 4.35 million ARB on Binance, underscoring the selling pressure in the market.
The bulls had some success last week. The trend has been overwhelmingly bearish since late August, but things started to improve on September 12. However, the price chart showed that the short-term gains could be erased as ARB approached a region of strong resistance.
Prices aside, Arbitrum tokenomics has been a topic of conversation. It is another factor that traders and especially long-term investors should take into account. Over the next week, here’s why bullish momentum could stall.
Worth Watching Fibonacci Retracement Levels and Liquidity Pockets to the North
Based on the decline from $0.923 to $0.739 that began on September 8, a set of Fibonacci retracement levels (pale yellow) was plotted. It showed the 61.8% and 78.6% levels at $0.853 and $0.884, marking them as levels where a bearish reversal could occur.
The ARB market structure on the one-day chart was bearish, although bullish on the H4 chart. Similarly, the Relative Strength Index (RSI) noted strong bullish momentum in the past few days. Furthermore, the Chaikin Money Flow (CMF) also skyrocketed to indicate a notable capital inflow into the Arbitrum market.
However, on-balance volume (OBV) has remained stubbornly stable over the past ten days even as prices have risen, suggesting a lack of demand behind the move. Therefore, short sellers can wait and watch the token’s reaction in the $0.88-$0.9 region.
Could Liquidity Pools Just Above $0.9 Attract ARB?
Coinalyze data highlighted the bearish sentiment in the near term. The open interest (OI) fell lower in the last 24 hours as Arbitrum noted a drop from $0.87 to $0.836, which was a sign of discouraged bulls. The spot cumulative volume delta (CVD) also trended lower since September 16 to underline the selling pressure in the spot markets.
The data shows large sell orders in the area between $0.84 and $0.912, which amounted to just over $1 million. Furthermore, the $0.91-$0.93 area was important as it was close to the previous lower high on the daily chart.
Therefore, it was also possible that the current bounce could extend to $0.92 before the bulls run out and the bears can take control again. To the south, a bearish target would be the lows of $0.739 and the 23.6% Fibonacci extension level of $0.6955.
Although the current situation is challenging, the crypto community will closely watch any signs of recovery and any measures Arbitrum takes to address its current challenges. As always, caution and careful research are essential for cryptocurrency investors who want to make informed decisions in an ever-evolving market.
By Leonardo Pérez