Algorande (ALGO) was down 10% over the past day, as of press time, as the market adjusted. This move could mark the start of a broader decline, based on the technical patterns seen on the chart.
Other factors, particularly activity in the perpetual futures market, are likely to play a major role in increasing pressure and extending the current decline.
Bollinger bands signal further decline
Bollinger bands, an indicator used to assess whether an asset is overvalued or undervalued while identifying potential support and resistance levels, suggest that further decline could be imminent.
This outlook follows ALGO’s rejection to the upper (red) band, which acted as resistance and signaled an overvalued zone, pushing prices lower. Such rejections typically push prices towards the middle band, or neutral zone, marked in blue, as has been seen many times in the past.
Notably, the price has not yet reached this intermediate region. The gap between the current price of $0.677 and the middle band implies a potential further downside of around 10%. The likelihood of a continued decline is also supported by the trend-based indicator, the Average Directional Index (ADX), which follows an upward trend as prices decline.
ADX measures the strength of the trend. When it rises while the price is falling, it indicates that the prevailing downtrend is strengthening and could persist.
Futures market adds pressure
Futures market activity has not supported price stability and instead points to an acceleration of the decline.
Over the past day, the market saw a significant capital outflow, with over $6.5 million flowing out of ALGO’s perpetual contracts as the broader cycle weakened.
This flow output aligns with an abrupt change in positioning. At press time, the weighted open interest funding rate increased from 0.0073% to 0.0027% over the past 24 hours, reflecting a decline in long positions. This trend suggests an increase in short positions on ALGO, a typical signal when traders anticipate further decline.
As a reminder, between April 7 and 8, ALGO maintained a bullish outlook. However, the short sellers proved themselves right and the price fell in the last 24 hours. Spot investors appear to be the key group mitigating further declines, even as short positions continue to expand in the derivatives market.
Over the past day alone, the spot market has seen nearly $496,000 in inflows into ALGO despite falling prices, signaling accumulation at lower levels. This is part of a broader trend. Over the past week, spot investors have consistently accumulated ALGO, with total purchases reaching $1.98 million.
This places the average daily net inflow at the time of writing, at around $396,000.
Sustained accumulation in the spot market could help cushion ALGO’s decline. If buying pressure remains strong, it may limit losses or even trigger a reversal before the projected decline fully materializes.
Final Summary
- ALGO could see a further decline of 10% as indicators point to a move towards fair value.
- Perpetual traders could intensify the ongoing sell-off, while spot investors appear to view the decline as a haircut and continue accumulating ALGO.
