IOTA, an open source decentralized ledger and cryptocurrency focused on the Internet of Things (IOT), saw its native IOTA token rise on November 29 after announcing the creation of the Iota Ecosystem DLT Foundation and its registration in Abu Dhabi 43%. The capital of the United Arab Emirates. This makes IOTA the first DLT foundation regulated by the Abu Dhabi Global Market (ADGM).
According to the project’s press release, the foundation will inject $100 million in IOTA tokens that will vest over four years, with traders clearly viewing the announcement and funding plan as a short-term bullish catalyst.
Historically, incentives for ecosystems and developers from blockchain and DeFi protocols have tended to attract liquidity to projects and boost sentiment among market participants.
In August 2021, Avalanche’s AVAX token plunged 1,400% after the Avalanche Rush DeFi incentive program was announced.
Similar results emerged for Trader Joe’s JOE token in the months after the DeFi protocol announced plans to build operations on Arbitrum in December 2022.
Currently, the Arbitrum ecosystem is hosting liquidity and developer incentives that are consistent with the recent 62% recovery in the ARB token price.
Is IOTA’s price action another sell-off news event?
On November 30, cryptocurrency derivatives data provider Coinalyze posted the following IOTA chart on Twitter, noting that IOTA’s “funding rate and long-short ratio” are at “historical lows.”
Funding rates and long-short ratio hit record lows! pic.twitter.com/wloZNoLMxu
— Coinalyze (@coinalyzetool) November 30, 2023
Traders often interpret funding rates and long-short ratios as indicators of sentiment and investor activity. In this case, traders believe that low funding rates reflect crowding in short positions, where good news or price events can quickly catalyze a rapid price reversal, squeezing short traders out of their positions.
Comparing Coinalyze’s chart to a standard candlestick daily chart seems to reflect this dynamic, especially the high volume buy candle on November 29th.
In addition to the recent price breakout, IOTA price is trading at multi-year lows, and on the weekly timeframe, the charts reflect a certain level of disinterest in the project from a trader’s perspective.
Cryptocurrency price surges have long led to mainnet upgrades, multi-chain expansions, funding announcements and developer incentives. Only time will tell if this is the case with IOTA.
This article does not contain investment advice or recommendations. Every investment and trading activity involves risks, and readers should do their own research when making decisions.
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