Midnight: Perpetual Traders Exit – NIGHT Faces the Consequences

As the cryptocurrency market experiences increased volatility, Midnight [NIGHT] has shifted firmly into a bearish trend due to significant capital outflows that have intensified over recent weeks.

Key Takeaways

NIGHT’s price has dropped 41% over three weeks, with a 10% decrease in the last 24 hours.
A notable capital outflow has occurred, with $5.4 million leaving the market.
The current market sentiment favors short positions, as indicated by the negative Funding Rate.
Major exchanges, particularly Binance and OKX, have seen significant sell-side activity, contributing to declining prices.
Further declines may be possible, but recovery is feasible if market conditions improve.

Midnight: Perpetual Traders Exit – NIGHT Faces the Consequences

In the past three weeks, the price of NIGHT has plummeted by 41%, with an additional 10% decline in the last 24 hours. This selling pressure is primarily driven by perpetual market traders, creating a challenging environment for the asset.

Increasing Pressure in the Perpetual Market

The latest downturn has been exacerbated by a sharp wave of capital leaving the market over the past day. This resulted in NIGHT losing more than 10% of its circulating liquidity, representing a significant drawdown.

To quantify this, the outflow amounts to $5.4 million, reducing the total balance of perpetual contracts to just $47.95 million. This substantial drop indicates that traders are primarily closing their positions rather than new investments entering the market.

Night Open Interest Weighted Funding Rate

Source: CoinGlass

Beyond just the outflows, the remaining liquidity is currently skewed towards short positions. Market data indicates that sell-side contracts are now outnumbering buy-side contracts, as reflected in the Open Interest-Weighted Funding Rate, which has dipped into negative territory. As of now, the Funding Rate stands at -0.0156%, a significant negative figure underscoring the extent of seller dominance. Continued declines at these levels could increase the risk of NIGHT dropping further.

Who is Responsible for the Sell-off?

The primary drivers of the current decline seem to be traders on Binance and OKX. Market data suggests strong sell-side activity from both exchanges. The Taker Buy/Sell Ratio, which indicates whether the perpetual market volume favors buyers or sellers, provides further clarity. A ratio above 0 represents buying pressure, while below 0 indicates increasing selling activity.

Night Market Data

Source: CoinGlass

Currently, both Binance and OKX show Taker Buy/Sell Ratios below 0, with values of 0.533 on Binance and 0.77 on OKX. The surge in selling volume on these platforms reinforces the bearish sentiment. This is particularly significant since Binance accounts for the largest portion of NIGHT’s Open Interest in the perpetual market, and OKX ranks third. When the traders on these leading exchanges adopt a bearish stance, it heightens the chances of a wider market pullback, potentially leading to lower prices.

Is a Further Decline Inevitable?

Given the existing bearish conditions, the likelihood of further declines remains high. Insights from the liquidation heatmap suggest that prices may drift into lower liquidity areas, with NIGHT possibly heading towards the $0.060 level. Such zones can act as magnets during significant sell-offs, increasing the chances of extended downward movements.

Nonetheless, there is also a potential positive scenario. A descent into these lower liquidity areas could be followed by a rebound if market sentiment shifts in favor of buyers. Importantly, substantial liquidity clusters still exist above current price levels, extending towards the $0.073 range.

Night Liquidation Chart

Source: CoinGlass

These liquidity clusters often draw prices toward them, and with a bullish shift in direction, the chances of a rebound would improve. For the moment, however, the short-term momentum is leaning towards the bears, with NIGHT showing an increased likelihood of further declines as sell-side liquidity prevails.

Final Thoughts

As the market continues to unfold, traders should keep a close eye on developments and changing conditions in the cryptocurrency landscape.