Stellar (XLM) Rally Shows Signs of Exhaustion as Market Interest Wanes

• XLM Open Interest drops from ATH of $339M to $209M
• Social dominance declines from 3.13% to 1.73%
• Technical indicators suggest potential retracement to $0.28

Stellar (XLM) has experienced a significant shift in market dynamics following its impressive 100% surge last week.

The cryptocurrency’s derivatives market shows clear signs of cooling, with Open Interest (OI) dropping dramatically from its all-time high of $339 million to $209 million, signaling a potential end to its recent bullish momentum.

The sharp decline in Open Interest represents the closure of derivative positions worth approximately $130 million, coinciding with a 10% price decrease in the last 24 hours.

This reduction in derivatives market activity typically suggests diminishing buying pressure, raising concerns about XLM’s ability to maintain prices above the $0.45 level.

XLM’s social dominance raises concerns

Adding to the bearish outlook, Stellar’s social dominance metrics paint a concerning picture. The indicator, which measures discussion volume relative to the top 100 cryptocurrencies, has plummeted from 3.13% to 1.73%.

This significant decrease suggests market participants are shifting their attention elsewhere, potentially leading to reduced demand for XLM .

Technical analysis further supports the possibility of continued downside. The Money Flow Index (MFI) has retreated from overbought territory, traditionally a precursor to price corrections.

If current market conditions persist, XLM could find itself testing support at $0.28, with further potential downside to $0.17 if the $0.22 support fails to hold.

However, the situation isn’t entirely bearish. A revival in buying pressure across both derivatives and spot markets could invalidate this bearish outlook, potentially driving XLM toward the $0.64 level.

The coming days will be crucial in determining whether Stellar can maintain its recent gains or succumb to mounting selling pressure.