Axie Infinity (AXS) Prepares for a Rally as Derivative Traders Bet on a Price Drop

Axie Infinity [AXS] has underperformed in recent weeks, dipping by approximately 5.42% over the past month after reacting off a major resistance level.

Axie Infinity [AXS] token has not performed well in recent weeks, decreasing by about 5.42% over the last month after reacting off a major resistance level.

As the market continues to be affected by the strong bearish sentiment, it is likely that AXS’s dip will continue, as several metrics support this outlook.

A necessary dip for an upswing in AXSAfter bouncing off the resistance zone at $5.366 within its ascending triangle pattern, AXS has declined, and this downward trend may continue toward the diagonal support of the formation.

If AXS reaches this support level, it could resume its upward momentum, with an initial target at the pattern’s resistance zone.

A successful breakout above this resistance could drive an additional 28.47% surge, bringing AXS to $6.895. This projection is based on the measured distance between the resistance and support levels within the pattern as indicated in the chart below.

Traders shift to sell as AXS faces downward pressureOn-chain data from Coinglass analyzed by AMBCrypto showed that traders are shifting toward selling, which could indicate a potential for further price declines.

Recent liquidation data highlighted significant losses for long traders, with $50.56K out of $51.82K liquidated in the past 24 hours being attributed to those betting on a rise in AXS’s price.

This showed that short traders took control, successfully betting against a rally in AXS and likely pushing prices down.

At the time of writing, the funding rate was still negative, which indicated a higher demand for short positions as short traders were willing to pay long traders to hold their short positions, thus contributing to the downward pressure on AXS.

If these metrics continue, AXS’s decline is likely to continue until a shift in market structure, perhaps near the pattern’s historical resistance zone.

Gradual supply squeeze builds upWhile derivative traders are expecting a drop in the price of AXS, activity in the spot market signaled a different sentiment as traders prepared for a rally.

Is your portfolio in the green? Check the Axie Infinity Profit CalculatorAccording to Coinglass, over the last 24 hours, $417.88K worth of AXS was withdrawn from exchanges, which decreased the available supply and contributed to a potential supply squeeze.

This shift suggested that the bearish sentiment might be ending, with a turning point likely on the horizon for AXS as upward momentum builds.

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