Derivative product data shows that the current open interest is $4.63 million, with a positive funding rate (+0.01304%). A positive funding rate indicates that long traders in the market are paying fees to short traders, suggesting a certain bullish sentiment. However, the chart shows that prices are in an extremely compressed consolidation range, with the Bollinger Bands contracting to the extreme, and trading volume is weak. This is often a signal that the market is building energy for the next wave of volatility.
From the perspective of institutional liquidity, smart money tends to hunt for liquidity outside such consolidation ranges. The key liquidity area below is near the recent consolidation low of around $1.151. Given that the funding rate is positive, there may be a significant number of long positions in the market, with stop-loss orders concentrated below $1.151. Therefore, a typical institutional trading strategy is to first break below this support level to trigger these stop-loss orders (i.e., 'stop-loss hunting'), creating a bearish illusion before quickly pushing prices up.
The current sideways consolidation is not a trend but prepares for the birth of a trend. In light of the above analysis, a downward breakout is likely a 'fakeout', with the real intention of clearing long leverage to pave the way for subsequent upward movement. The true trend may emerge after liquidity is hunted. Therefore, our trading bias is to look for bullish reversal opportunities after prices sweep liquidity below.
Institutional Setup:
Entry Zone: $1.10 - $1.15 (look for entry signals after prices break down and reclaim the $1.15 support level)
Target 1: $1.25 (liquidity target, i.e., upper boundary of the consolidation range)
Target 2: $1.40 (trend target, i.e., price congestion area before the previous sharp decline)
Stop Loss: $1.05
$TRADOOR
