Hyperliquid is testing a critical resistance level once again after multiple failed attempts. The futures perpetual market indicates that bullish leverage for the hyper-liquid perpetuals is decreasing. As such, the coin may be rejected once more.
Hyperliquid exchange’s token HYPE has been testing the 20-day moving average (MA), a short-term indicator, since early November. However, there was not a single occasion until just a few days ago that the prices crossed this resistance level.
On the chart, only the wicks of the candlestick stuck above this level, but not a single part of the candlestick crossed this level. The bulls tried pushing the prices; however, the sellers dominated, and the close was below this level.
The chart above shows that HYPE was trading inside a bullish falling wedge before breaking out. A typical breakout from a wedge results in a price spike, which is equivalent to the height of the wedge at its widest point. However, HYPE started consolidating once it broke the wedge. It is once again testing the 20-day MA, but it may be rejected once again.
Perp bulls lose momentum
Why? The HYPE perpetual market’s bullish strength is waning as the market is cooling off. The futures market, although not directly correlated to the spot prices, has some relativity. When the longs outweigh the shorts on the perp market, it means the market is bullish, and the spot prices could increase as arbitrageurs can buy spot and sell perps, pushing the spot price up.
But looking at the funding rate, which gives the direction of the price movement, the longs are paying the shorts, or the market is bullish. This means that traders are so confident about the price spiking that they are paying shorts to take a long position. However, the funding rate is declining.
Although the funding rate is positive, it is decreasing. As such, it is safe to say that the aggressive leverage is reducing. When the rate is positive, the overall market is still bullish, but the decreasing rate signals that bulls are less aggressive or that profit-taking/short hedges are being added. When this keeps on increasing, the funding rate may even go into the negative zone, and HYPE will not be able to break above the 20-day MA.
