Growing Liquidations Lead to 5% Weekend Drop in Shiba Inu
Key Points
Shiba Inu's status as a key gauge of investor sentiment is on full display right now.
With sentiment declining, and investors' bullish bets being unwound, some are concerned about the future of this top-tier meme coin.
Here's what to make of this weekend's move, and what it may tell us about what is ahead.
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The world's second-largest meme coin, Shiba Inu (CRYPTO: SHIB) is a cryptocurrency that some investors rightly view as more of a gauge of speculative fervor in the digital asset sector than an actual investment vehicle.
It's well known that traders view Shiba Inu as a vehicle to play momentum swings to the upside and downside. But the sheer volume of liquidation activity over the past weekend is notable and is sending a signal to many who are considering putting capital to work in other, seemingly safer alternatives.
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Let's dive into what transpired this weekend, which led to a 5.5% decline from the equity market close on Friday to 4:00 p.m. ET Monday.
Liquidations galore
Source: Getty Images.
Over the past day alone, nearly $500 million has been liquidated across the entire crypto market. Most of the positions getting unwound have been on the long side of the trade (bulls betting on a rebound), with Shiba Inu's liquidation data signaling that leverage remains a key driver of near-term volatility for most digital assets.
Over the past day, investors using derivatives to bet on bullish price movements in Shiba Inu have seen nearly a quarter million dollars liquidated. In comparison to the amount of similar short bets liquidated over the same time frame (only $16,000 or so), it's clear to see how lopsided the momentum for this particular meme token is right now. Adding net spot inflows into Shiba Inu (which are down nearly $1 million over the past 10 days), the overall market is painting a very bearish picture for this token today.
For assets like Shiba Inu and its meme coin peers, I tend to pay closer attention to key technical factors than to larger, more established networks that generate revenue or cash flow-like metrics. With speculative fervor abating in a big way in recent weeks, this is one digital asset I think investors need to be very careful with right now, particularly for those thinking about taking the long side of the bet.
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Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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