coindesk.com
Privacy-focused cryptocurrency Monero ($XMR) has seen a sharp price sell-off over the past three days, with open positions in futures rising to their highest level since December.
On Wednesday, the largest privacy coin by market capitalization fell to $325 on Kraken, having peaked at $420 on Monday, according to data source TradingView.
The sell-off follows a meteoric seven-week rise from $165 to $420, supposedly led by a favorable U.S. regulatory outlook and impending FCMP++ upgrade, which will enhance Monero's quantum resistance by providing forward secrecy.
Also read: Key Reasons Monero Surge Continues Even as Bitcoin Bulls Take a Breather
Open interest rises
The price decline is characterized by increased participation in the futures market, where the number of active or open contracts jumped to 161.37K $XMR, the highest tally since Dec. 20, according to data source Coingecko. The OI has increased by 20% over the past three days.
An increase in open interest alongside a price drop is typically interpreted as representing a bearish sentiment, with more traders taking short positions in anticipation of a price decline.
Funding rates hold positive
That's not necessarily the case with $XMR, as the perpetual funding rates continue to be positive, indicating a bias for long positions. Funding rates, charged every eight hours, represent the cost of holding levered futures bets, with positive values representing a dominance of bullish long bets.
Therefore, the uptick in $XMR's open interest likely represents a "buy the dip" mentality – traders taking long positions on the price dip, anticipating a quick recovery.