RUNE is overbought, but profit-taking could soon lead to…

• RUNE’s price recorded a 23% uptick over the past week
• With bull exhaustion setting in, a price drawback might be imminent soon

RUNE, the native token of ThorChain, closed the last trading week as the second-best performing asset, with gains of over 20%, according to CoinMarketCap.

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The price rally followed ThorChain’s integration with MetaMask, which would allow its users to conduct asset swaps in a self-custody environment.

Week ahead looks gloomy

RUNE outperformed the rest of the cryptocurrency market in August, rallying by 66% due to its low positive correlation with Bitcoin [BTC] and the series of protocol updates on the decentralized liquidity network.

With the token’s price at overbought levels at press time, the bulls might experience difficulty championing any further price rally. 

On the daily chart, the alt’s price traded above the upper band of its Bollinger Bands indicator. This indicator is used to identify overbought and oversold conditions in a market. When the price of an asset trades above the upper band, it is considered to be overbought. This suggests that the price has moved too far above its moving average and will likely experience a correction soon.

Likewise, the K line (blue) of the altcoin’s Stochastic RSI indicator was pegged at 80.07%, suggesting that RUNE was overbought. This indicator also measures overbought and oversold conditions in the market. 

A Stochastic RSI value above 80 typically suggests increased accumulation. It shows that an asset has been overbought and the price will experience a drawback. Especially as bull exhaustion is common at such levels. 

Moreover, profit-taking activity might have commenced among RUNE’s spot traders at these overbought highs. Although still positive, its Chaikin Money Flow (CMF) began its descent on 16 September and has since trended south. At press time, the indicator sat on its center line at 0.01 

The decline in RUNE’s CMF suggested a drop in liquidity provisioning among daily traders. This could be RUNE traders cashing in their gains following the prolonged period of a price rally. 

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Realistic or not, here’s Thorchain’s market cap in BTC’s terms

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Short traders bear the brunt

Despite the surge in price in the last month, traders in RUNE’s Futures market have mostly opened short positions. In fact, data tracked by Coinglass

showed that the token’s funding rates across crypto-exchanges have been primarily negative since 17 August.

RUNE’s short traders were plunged into losses as its price trended in the opposite direction. In fact, short traders have suffered the most losses of all total liquidations recorded since mid-August.