Cronos (CRO) has just become one of the fastest-growing cryptocurrencies in the market, surging nearly 20% in just the past 24 hours. This increase is driven by the overall recovery strength of the crypto market along with the news that Trump Media Group (TMTG) confirms the purchase of CRO.
However, alongside the attention from bulls, on-chain signals suggest the market may have become too hot, increasing the likelihood of a short-term correction.
CRO surges strongly thanks to Trump Media news
In the past 24 hours, CRO has increased nearly 20%, largely stemming from news that Trump Media plans to buy a large amount of this token. According to initial information, Trump Media is preparing to acquire $6.42 billion worth of CRO, thereby igniting speculative sentiment and driving the uptrend.
However, new disclosures indicate that this plan is actually much more cautious. Instead of immediately purchasing $6.42 billion, the company will start with about $200 million in cash along with token positions equivalent to about 19% of CRO's market capitalization.
Traders rush to open Long positions, liquidation risk rises high
As CRO surged, derivative traders rushed to open Long positions, causing the Long/Short ratio of this token to soar to its highest level in the past 30 days. At the time of writing, this ratio stands at 1.08, according to data from Coinglass.
The Long/Short ratio measures the balance between the number of traders betting on rising and falling prices. A figure above 1 indicates that the Long side is dominant, reflecting strong confidence in the upward trend. Conversely, a ratio below 1 indicates that demand for Shorts is higher.
Although the Long/Short ratio of CRO reflects optimism, it also makes the market vulnerable to liquidation risks. If the price reverses, a large amount of Long positions could be forced to sell, thereby increasing volatility.
CRO enters the overbought zone
The Relative Strength Index (RSI) on the daily frame shows that CRO has entered the overbought zone – a classic signal warning of the potential for a correction. At the time of writing, the RSI index of CRO is at 80.77.
RSI is a tool that measures the overbought/oversold condition of an asset, ranging from 0–100. When RSI is above 70, the asset is often considered to have entered the overbought zone and is at risk of a downward correction. Conversely, if RSI is below 30, it is considered to have fallen into the oversold zone and has the potential to bounce back.
With an RSI of 80.77, CRO is showing a risk of short-term correction as buyers gradually tire. If a trend reversal occurs, the price could fall back to the $0.195 range – the next important support level.
Conversely, if demand continues to be sustained, CRO could reclaim the $0.23 mark and even bounce up to $0.27 – a price level last recorded in May 2022.