Hedera has recently experienced a brief price uptick after hitting a local low on December 19, with the HBAR token rising approximately 11% at the time of reporting. Despite this bounce, the broader market sentiment remains bearish, as HBAR is down nearly 50% over the past three months and has shown weakness in the last week.
The primary concern extends beyond price movements to the behavior of capital within the market. While the recent price increase might suggest recovery, underlying data indicates growing stress. Analysts warn that without intervention from an unforeseen source, the current rebound might turn into a bull trap, misleading investors into thinking the asset is on an upward trajectory.
The first red flag arises from capital flow metrics, particularly the Chaikin Money Flow (CMF), which assesses the movement of large wallets in and out of an asset by considering both price and volume. Currently, HBAR’s CMF is declining, nearing a descending trendline that has been indicative of capital outflows for several weeks. This scenario is particularly concerning as it signals diminishing interest from major investors who are reducing their positions over time.
If the CMF drops below this trendline, it would confirm a shift from weak inflows to actively managed outflows. This aligns with the established pattern that sees HBAR trading within a descending channel. Under such circumstances, the recent price bounce could struggle to maintain momentum.
However, there is a potential counterbalance to this downward pressure. Derivatives data indicate a pronounced bias toward short selling, with cumulative short liquidations on the Bitget exchange nearing $9.9 million, compared to about $6 million in long liquidations. This signifies a 50% greater concentration of short positions compared to longs at current price levels.
A pivotal factor could be Bitcoin’s performance, given that the correlation between HBAR and Bitcoin has been measured at a high 0.85 over the past week. A correlation close to 1 signifies that the two assets move in tandem. Should Bitcoin appreciate, it could potentially uplift HBAR’s price, prompting short sellers to cover their positions and triggering a short squeeze rather than a surge driven by organic demand. Nonetheless, without a positive momentum from Bitcoin, the current short bias will likely not be sufficient to stabilize HBAR’s price.
At present, HBAR is positioned near the lower boundary of its descending channel. A critical support level exists around the $0.10 mark; losing this level may lead to further breakdowns in price structure and accelerate existing long liquidations. Such a move would substantiate the CMF’s decline and likely extend the prevailing downtrend.
For any chance of recovery, HBAR requires backing from Bitcoin and a push toward the $0.13 level, which represents the upper portion of the recent trading range. Hitting this level could spur a wave of short liquidations within the next month.
In conclusion, while the recent 11% rise in HBAR presents a glimmer of hope, the prevailing indicators suggest a precarious situation. With weakening capital flows and a bearish market structure, the risks appear skewed towards further declines unless a significant external catalyst, such as Bitcoin gaining traction, intervenes.
