Pump.fun rallies as buybacks cut supply – Can price reclaim $0.004?

With the Fed rate hike unfolding as expected, crypto investors reacted strongly.

Pump.fun [PUMP] successfully defended $0.0034, and at press time, PUMP was trading around $0.0038, up 9.6% on the daily charts. The upside move saw PUMP flip the Simple Moving Average (SMA), signaling strengthening short-term momentum.

What’s behind PUMP’s rebound?

PUMP signaled a trend reversal mostly supported by both increased usage and reduced supply. While its success remains debatable, PUMP has constantly deployed its deflationary approaches to absorb pressure.

In fact, the project has been aggressively buying and burning tokens in an attempt to reduce supply, as the token remains highly inflationary.

Over the past day, for example, Pump.fun bought back 240 million tokens. Usually, token buybacks reduce the supply available for immediate selling, thus easing the market, even for a short term.

Moreover, Pump.fun saw renewed demand for the network. In fact, Active Addresses jumped to 1.2 million, according to Defillama data.

Rising Active Users suggested that investors are not attracted to the protocol and jumped to access its services. Often , such high usage helps in increasing demand for the native token and, in many cases, helps to achieve growth.

Is this time different though?

A few days ago, PUMP jumped to a local high of $0.004. However, it faced rejection and resulted in a pullback. For this upsurge, AMBCrypto reported that the altcoin rallied, driven by capital flow, especially from perpetual futures markets.

This means speculation was the drive of the earlier period , and this has proved to be a thorn for a sustained price uptick.

Unfortunately, although we have observed a different approach this time, speculation also remains. At the time of writing, PUMP’s Open Interest rose to 4% while the derivatives volume surged 19%. 

However, this is currently different; previously, most investors were going long, and now, especially on Binance, only top traders are going long. Notably, the Long Short Ratio also remained below 1, suggesting overall, investors are betting on another slip.

What can momentum indicators tell us?

A look at the momentum indicators, PUMP leans to the upside for now. The DI+ hovered above the negative index, while the ADX sat above them both at 36 as of writing.

This suggests that the upside is stronger than the downside, but bulls are not fully in control. If the recent demand holds and pushes DI+ above 25, it will signal a bullish takeover, and doing so, PUMP will reclaim $0.004 and eye $0.0046.

For this to hold, the altcoin must ensure a close above $0.0036, and failure to do so, PUMP, will revisit $0.0034.

Final Summary

• PUMP surged 9.6%, successfully held $0.0034, and rose to a local high of $0.0038.
• PUMP rebounded, driven by reduced supply and new usage as the team repurchased 240 million tokens, while active address climbed to 1.23 million.