Markets
Cryptocurrency Traders In Disbelief As Celestia’s TIA Token Surges 25%
The native cryptocurrency of data availability blockchain network Celestia, TIA, jumped 25% to $7.30 this week, posting the best performance among the top 100 digital assets by market capitalization.
Traders appear skeptical of the current price surge and are taking bearish bets by shorting perpetual futures contracts tied to the cryptocurrency, according to funding rates tracked by CoinGlass.
Average funding rates across exchanges turned negative over the weekend and have since dropped to -0.1231%, reaching levels not seen since January. In other words, the bias toward bearish bets is the most pronounced in six months.
Calculated and collected from traders every eight hours, funding rates represent the cost of holding bullish or bearish bets. A negative rate implies that traders with short positions, betting on a price decline, pay a funding fee to long positions. This occurs when there is a high demand for short positions relative to long positions.
The bias toward short positions amid rising prices looks like a classic case of recency biaswith traders giving more weight to the TIA’s price drop over the past few months than other vital developments. The TIA’s latest bounce comes after a five-month downtrend that saw prices fall 80% from $21 to below $5. So it’s not particularly surprising to see traders selling the bounce.
However, traders may be overlooking the role of the modular Celestia blockchain as a data availability layer for Layer 2 networks like the burgeoning permissionless liquidity layer for Web3 trading, Orderly Network, meaning the price rally could be sustainable.
“The need for a data availability layer here makes sense after realizing that secure/permissionless liquidity is by far one of the biggest barriers to using onchain perp markets. So, having a middle layer that can provide shared liquidity to any exchange seems like an obvious solution for the future,” the pseudonymous analyst said. DeFi^2 explained on X.
“As a central part of the infrastructure for cases like this, Celestia has many factors in place to build a strong market, including Modular Summit “happening this week with Celestia at the center,” DeFi^2 added.
Celestia, a modular blockchain, separates consensus from execution, improving scalability. It acts as a storage system for data used by rollups and layer 2 networks, helping them become faster and handle more transactions.
Orderly Network, a permissionless infrastructure and liquidity layer provider for Web3 trading built on the Near blockchain, uses Celestia for data availability. On July 5, Orderly Network’s cumulative transaction volume hit a record $6.2 billion, with cumulative net fees exceeding $6.6 million while accounting for 40% of the total data published on the Celestia network, the network told CoinDesk in an email.
Additionally, the downward trend in short positions could catalyze a further rise in prices. The financing fees that traders holding short positions are currently paying will become a burden if prices remain resilient, forcing them to abandon their bearish bets. This in turn could push prices higher in what is known as a short squeeze rally.