The price of TRX spiked by 17.41% coming from $0.08 to $0.94 on July 22 in a matter of two hours. This increase was made with a large volume of 42.52M on the second hourly candle that caused the spike and a volume of 6.26M on the previous green candle.
But even with the high volume behind this large price increase, it was short-lived. An immediate retracement followed back to the level from which it was made.
Was this a sign of whale activity? Can it propel the price of Tron into a sustainable uptrend? Perhaps it was it a temporary mishap – a large market order causing the price spike due to slippage?
Looking deeper into uncovering what caused this price spike – was it due to derivatives, slippage, or on-chain? There is evidence to suggest that many factors were intertwined.
On the Tron network, we saw high activity on July 22, most notably in transaction volume and the average transfer value.
Transaction volume rose from $67.6M to $325M before falling back to $65.36 on July 23.
The Average Transfer value (The sum USD value of native units transferred divided by the
count of transfers) also supports on-chain activity by showing that it, too, spiked on July 22, coming from $31.7 to $190.
However, by looking at the active addresses count, we can see that the activity declined on July 22.
As this metric shows a “sum count of unique addresses that were active in the network,” it can indicate that this buying pressure could be more attributable to the derivatives market and potential short squeeze.
When it comes to the TRX derivatives market, one metric stands out. That is the funding rate.
In the examined period we can see that the Open-Interest-Weighted Funding Rate was extremely negative at the time. The funding rate is a periodic payment to long or short traders based on the difference between perpetual contract markets and spot prices. A negative value means that short-position traders are dominant and are willing to pay long traders.
On the liquidations chart above, we can see that there were definitely more short positions on July 22 liquidated compared to long ones, but not as high as we had assumed. A total of 1.83M short positions were liquidated vs. 1.49M long positions.
But this data is only to the price peak. Havoc was made with these sudden swifts. Although the exact mechanics of the price spike remains imprecise, with the next day before the price decline displaying low liquidations, it is safe to say that the price spike was caused by the derivatives market.
After reaching $0.183 on April 16, 2021, which was its highest price in the last bull cycle, the price of TRX started its multi-year correction. This correction made a descending triangle with a horizontal support level of around $0.05.
Considering the correction structure potentially ending as a WXYXZ complex five-wave one on November 15, 2022, and with a breakout to the upside from the descending triangle, we could have seen the start of a bull cycle.
The price went to develop a five-wave impulse from mid-November last year to its current level of $0.084. There are two different possibilities of how this impulse should be counted, but in both, from the current levels, a descending move would be expected. Either a lower degree one to the 0.382 Fibonacci retracement at $0.071 or $0.681 at $0.061.
If the price has indeed started its bullish cycle, this descending move should its first retracement, making the first higher low. The resistance zone with which the price has interacted in July of around $0.086 has been strong, causing a rejection on the previous interaction on June 3.
Breaking it was proven to be hard, and the spike seen on July 22 has attempted to do so, but with no luck as of now. We are still waiting for a rejection to occur after the recent interaction, which looks highly likely. In the case that the price manages to enter the upper resistance range it could continue either moving with a large volume or as another short-lived attempt.
The price spike of 17% we saw on July 22, was definitely caused by the derivatives market. Some signs of on-chain activity might have been caused by these price fluctuations.
We have seen another interaction with the significant resistance zone at $0.086 on July 22 and the price left a large wick. A rejection is yet to be seen in the form of large red candles on the daily chart, but at this stage, it looks more likely than further uptrend continuation.
A decrease would be expected from the current levels, and from its momentum and depth, we will reevaluate the primary projection. The first target would be at $0.071, but if the price goes below this level, then the next potential support point would be at $0.061.
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.