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The value of IMX, the native token of ImmutableX, the Layer 2 (L2) scaling solution for NFTs on Ethereum, has risen by 22% in the last week.
This price uptick has increased activity in the token’s derivatives market. However, this is not without a catch.
ImmutableX Sees Uptick in Open Interest
At press time, IMX trades at $1.58. Over the past week, the spike in the L2 market has caused the token’s price to grow by double digits. Due to this, activity in its derivatives market has surged.
The token’s open interest is $23 million as of this writing. The open interest rally began on July 7 after it plummeted to a year-to-date low of $14 million.
Since then, IMX’s open interest has grown by 39%. It currently sits at its highest level since June 6, according to Santiment’s data.
Read More: What is ImmutableX (IMX)?
An asset’s open interest refers to the total number of outstanding derivative contracts, such as options or futures, that have not been settled. When it spikes like this, more traders enter new positions, bringing fresh liquidity into the market.
However, many new entrants into the IMX derivatives market have been demanding short positions. This can be seen in the predominantly negative funding rates recorded since July 6.
Funding rates are a mechanism used in perpetual futures contracts to ensure an asset’s contract price stays close to its spot price. When they are negative, it means more traders are buying the asset, expecting a decline than those buying and hoping for a rally.
IMX’s funding rate across cryptocurrency exchanges is -0.001% as of this writing.
IMX Price Prediction: Short Traders Should Brace For Losses
IMX is poised to continue its uptrend, having recently broken above its 20-day Exponential Moving Average (EMA).
An asset’s 20-day EMA measures its average price over the past 20 trading days. When the price rallies past this level, the uptrend is gaining strength as the shorter-term price action is starting to outperform the average of the past 20 days. Traders investors often view a breakout like this as a buy signal.
If buying pressure is maintained, IMX will climb to $1.75.
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However, if profit-taking ensues and IMX initiates a downtrend, it may trade at a low of $1.13.