Uniswap bulls lose $5.7M as UNI tests KEY support – What’s next?

Amid a broader market sell-off, Uniswap [UNI] saw strong downside pressure as UNI failed to defend $9 and plunged to a low of $8.00.

At press time, Uniswap traded around $8.19, down 9.16% on the daily charts. Over the same period, the altcoin’s trading volume surged 39%, reflecting increased sell-side activity as traders reduced exposure.

Uniswap long liquidations hit $5.7M

Before UNI plunged, a significant share of traders were bullish and had aggressively built up long positions. However, the sudden price drop saw these bulls kicked out of the market.

Over the past 24 hours, more than $5.7 million worth of long positions were liquidated, according to CoinGlass data.

Usually, when long positions are liquidated, it causes more selling pressure on exchanges. The increased sell pressure results in further downside, triggering a cascade of liquidations.

Things did not end there. As liquidation risks continued to rise, some traders panicked and hurriedly closed their positions.

Over the past 24 hours, Uniswap recorded $312 million in Futures outflows compared to $ 251 million in inflows. For that reason, Futures Netflow fell by 104% to -$61 million as of writing.

A negative Netflow here suggested that more traders exited the market over this period. In most cases, when traders panic-exit, it further weakens the market and could result in higher losses on the charts.

Momentum leans bearish

With selling pressure intensifying in the futures market, downside momentum has strengthened substantially.

Notably, the Moving Average Convergence Divergence (MACD) has been on a strong downward trajectory, falling to 0.45, at the time of writing. 

At the same time, the Stochastic Momentum Index (SMI) formed a bearish crossover and dropped deeper into the negative zone.

With both SMI and MACD trending strongly downward, the market momentum is strongly bearish and likely to continue. If the recent pressure persists, Uniswap will likely lose the $8 support and drop to $7.6.

However, activity in the spot market still gives some hope for a trend reversal. As the market plunged, Spot Netflow also declined significantly, falling to -$8.89 million.

Falling Netflow implied that more UNI flowed out of exchanges as the market declined, pointing to potential dip buyers.

Often, strong buying in the spot market tends to absorb pressure from derivatives and offer support to the market. Therefore, if demand holds during this dip, Uniswap could hold $8 and target a move above $9.

Final summary

• Uniswap plunges 9%, breaks $9 support, and falls to a low of $8.05 before slightly rising. 
• UNI saw a wave of liquidations, with $5.7 million in longs liquidated, triggering panic selling.