Algorand [ALGO] recorded a 10% drop over the past day, at press time, as the market adjusted. This move may mark the start of a broader decline, based on technical patterns observed on the chart.
Other factors, particularly activity in the perpetual futures market, are likely to play a major role in adding pressure and extending the current downside.
Bollinger Bands signal further downside
Bollinger Bands, an indicator used to assess whether an asset is overvalued or undervalued while identifying potential support and resistance levels, suggest that further downside may be imminent.
This outlook follows ALGO’s rejection at the upper band (red), which acted as resistance and signaled an overvaluation zone, pushing price lower. Such rejections typically drive price toward the middle band, or neutral zone, marked in blue, as seen on several occasions in the past.
Notably, price has yet to approach this middle region. The gap between the current price of $0.677 and the middle band implies a potential additional decline of roughly 10%. The likelihood of continued downside is further supported by the trend-based indicator, the Average Directional Index (ADX), which is trending upward as price moves lower.
ADX measures trend strength. When it rises while price declines, it indicates that the prevailing downtrend is strengthening and may persist.
Futures market adds pressure
Activity in the Futures market has not supported price stability and instead points to an acceleration of the decline.
Over the past day, the market has seen a significant capital outflow, with more than $6.5 million exiting ALGO’s perpetual contracts as the broader cycle weakens.
This outflow aligns with a sharp shift in positioning. At press time, the Open Interest Weighted Funding Rate dropped from 0.0073% to 0.0027% over the past 24 hours, reflecting a decline in long positions. This trend suggests a rise in short positions on ALGO, a typical signal when traders anticipate further downside.
For context, between the 7th and 8th of April, ALGO maintained a bullish outlook. However, short sellers have been proven correct, and the price has fallen over the last 24 hours. Spot investors appear to be the key group mitigating further downside, even as short positions continue to build in the derivatives market.
In the past day alone, the spot market recorded nearly $496,000 in inflows into ALGO despite the price decline, signaling accumulation at lower levels. This forms part of a broader trend. Over the past week, spot investors have consistently accumulated ALGO, with total purchases reaching $1.98 million.
This places the average daily net inflow as of writing, at approximately $396,000.
Sustained accumulation in the spot market could help cushion ALGO’s downside. If buying pressure remains strong, it may limit losses or even trigger a reversal before the projected decline fully plays out.
Final Summary
- ALGO may witness an additional 10% decline as indicators point to a move toward fair value.
- Perpetual traders may intensify the ongoing sell-off, while spot investors appear to view the dip as a discount and continue accumulating ALGO.
