Maker’s (MKR) 10% Surge Might Not Overcome the Threat of Long Liquidations

MKR, the governance token of MakerDAO, has witnessed a 10% price uptick over the past 24 hours. It’s currently trading at a weekly high of $1,224.

The recent double-digit rally has led many futures traders to take long positions, expecting a continued price rise. However, this surge may fall short of countering the looming risk of liquidations. Here’s why.

Maker Records Gains

MKR has maintained a downward trend since July, when a death cross pattern was formed. This pattern is formed when an asset’s short-term moving average (50-day small moving average) crosses below a long-term moving average (200-day small moving average). 

The death cross serves as a bearish signal that reflects a shift in market sentiment from bullish to bearish and highlights weakening momentum in the asset’s price. Traders interpret this crossover as a sign of potential price decline, which has led MKR holders to increase their selling activity.

Read More: What Are Tokenized Real-World Assets (RWA)?

MKR Death Cross. Source: TradingView

The altcoin’s price has declined 22% in the past month, placing MKR at a 13-month low. Key technical indicators suggest this downtrend may persist; for instance, its Bull Bear Power has remained sharply negative in recent weeks.

This indicator measures market momentum by comparing the strength of buyers and sellers. A predominantly negative reading reflects weak buyer activity. It suggests buyers cannot push prices above recent highs, indicating a lack of demand or confidence in the market.

MKR Bull Bear Power. Source: TradingView

Long Traders Face Liquidation Risks

MKR’s plummeting Open Interest reflects the lack of confidence. As of this writing, the token’s open interest stands at $81 million, witnessing a 12% decline since the beginning of the month.

Open interest refers to the total number of outstanding derivative contracts, such as options or futures, that have not been settled or closed. When it drops, it indicates a decline in market participation or a reduced number of active positions among traders. This suggests that traders are closing their positions to realize profits or cut losses.

MKR Open Interest. Source: Coinglass

Interestingly, despite the nonstop fall in MKR’s price over the past few months, many of its futures traders have continued to demand long positions. This is evidenced by its significantly positive funding rates, which stand at 0.014% as of this writing. 

According to Coinglass, the MKR long/short ratio has reached a monthly high, with almost 50% of the volume now dominated by long positions. Over the past 24 hours, MKR’s long volume has totaled $42.07 billion.

While this setup is usually viewed as a bullish signal, the large imbalance between long and short positions exposes the long positions to substantial risk. Prevailing bearish sentiment around MKR heightens this vulnerability; if the trend reverses, these long positions could be at risk of liquidation.

MKR Long/Short Ratio. Source: Coinglass

MKR Price Prediction: Buying Pressure Must Be Sustained

MKR is trading at $1,224, rebounding from its $1,032 support level following a 10% rally in recent days. Fibonacci Retracement levels suggest that the next price target is $1,683, a key resistance point.

To successfully break above this level, MKR’s price needs a significant and sustained surge in buying pressure. Achieving this will set the altcoin on a trajectory to surpass $2,000 for the first time since August.

Read more: Maker (MKR) Price Prediction 2023/2025/2030

MKR Price Analysis. Source:  TradingView

Conversely, if bearish sentiment resurfaces, MKR’s price could shed its recent gains and decline toward the support level at $1,032, putting the long postions at risk of liquidations.