The price of Stellar (XLM) could fall by 40% due to these three bearish settings
The price of Stellar (XLM) could fall by 40% due to these three bearish settings
Stellar (XLM) has retraced after a strong rally earlier this year. The token has dropped 16% in the last month, falling 8% this week and losing another 1.7% in the last 12 hours. Annual gains still remain close to 300%, but several bearish signals suggest that sellers may have more room to push.
For long-term holders, the upcoming sessions could decide whether Stellar defends support or faces a sharp correction.
💥 The weakness in derivatives reduces support
One of the first warnings comes from the derivatives market. Open interest, which measures the value of active futures contracts, often shows how much leverage is behind a movement.
When open interest is high, traders can push prices sharply in any direction, often triggering squeezes.
On July 18, open interest for Stellar reached $588.53 million while the price of XLM was rising. That increase in leverage helped drive the movement, with short squeezes adding momentum. Since then, open interest has fallen to $306.22 million, a drop of nearly 50%.
With fewer contracts at stake, the possibility of another rally led by squeezes weakens, leaving the market more exposed to spot selling.
Bearish crosses increase pressure
Momentum in spot has also tilted negative on smaller time frames, which often show early trend changes.
In the 12-hour price chart of Stellar, the 20 EMA or exponential moving average crossed below the 50 EMA, a bearish signal showing that sellers have taken control in the short term.
In the 4-hour price chart of Stellar, the 50 EMA is close to crossing below the 200 EMA. A similar cross earlier this month preceded a drop. If confirmed, it would add another layer of selling pressure and strengthen the bearish bias.
The exponential moving average (EMA) is a moving average that gives more weight to recent prices, so it reacts faster than a simple moving average. A bearish cross occurs when a shorter EMA/MA moves below a longer one, indicating that sellers have the momentum.
💥 The triangle pattern indicates a risk of a price breakout for Stellar
In the daily price chart of Stellar, XLM is trading within a descending triangle, a bearish continuation pattern marked by lower highs pressing against a flat support.
The price is sitting near $0.39, just above key support at $0.38 and $0.36. If these levels fail, the lack of strong technical support points to a drop towards $0.23, a decline of nearly 40% from current levels.
Stellar now faces pressure from three fronts: the decline in derivatives activity, bearish crosses on short- and medium-term charts, and a descending triangle threatening a breakout. Together, these scenarios highlight the risk of a 40% drop unless buyers can quickly regain higher ground.
For buyers, the invalidation level is clear. A close above $0.43 would break the triangle upwards, canceling the bearish scenario and opening space for recovery. Until then, sellers remain in control.
