Cryptocurrency Traders Stunned by 25% Spike in Celestia’s TIA Token

The native token of the data availability-focused blockchain Celestia, known as TIA, has seen a notable increase of 25%, climbing to a price of $7.30 within the span of this week. This uptick marks the strongest gain among the top 100 cryptocurrencies in terms of market capitalization.

Despite the recent uptrend, traders appear unconvinced of its sustainability and are opting to place bearish positions on TIA by shorting its perpetual futures. This sentiment is reflected in funding rates observed on CoinGlass.

The average funding rates monitored across trading platforms turned negative over the previous weekend and have fallen to -0.1231%, a low point reminiscent of figures from January. This indicates that there is a significant current tendency towards bearish wagers, the most noticeable in a half-year timeframe.

Funding rates, recalculated every eight hours from trader contributions, signify the costs associated with maintaining positions, be they bullish or bearish. When funding rates dip below zero, it denotes that those holding short positions—anticipating a decline in price—are compensating funding to those going long. Such a scenario unfolds when the preference for shorts outstrips the interest in long positions.

A perception known as recency bias may be influencing traders, who seem to be giving undue weight to TIA’s recent price drop over more substantial developments. The rebound of TIA follows a five-month downward trend that witnessed an 80% decrease, from $21 to less than $5, making the traders’ inclination to ‘sell on the bounce’ somewhat expected.

However, traders might be neglecting the significance of Celestia as a modular blockchain that functions as a critical data availability platform for burgeoning layer 2 ecosystems, such as Orderly Network, a permissionless liquidity layer facilitating Web3 trading, which suggests the price recovery could have long-term legs.

“Recognizing the challenge that safe, permissionless liquidity represents in fully operationalizing onchain perpetual markets, a middle layer offering shared liquidity to various exchanges stands out as a logical strategy for the future,” a psuedonymous analyst DeFi^2 noted on X.

“In light of the Modular Summit occurring this week and Celestia’s pivotal role within it, DeFi^2 underscored that Celestia’s unique infrastructure components are converging to create robust support for a market turnaround this week,” DeFi^2 further elaborated.

By decoupling consensus from execution, Celestia, as a modular blockchain, enhances scalability. It serves akin to a repository for data harnessed by rollups and layer 2 networks, elevating their speed and capacity to process more transactions.

The Orderly Network—a permissionless liquidity provider built atop the Near blockchain leveraging Celestia for data availability—reported to CoinDesk via email that its cumulative trading volume hit a new high of $6.2 billion as of July 5, with net fees surpassing $6.6 million and contributing to 40% of Celestia network’s total data postings.

Additionally, the prevailing trend towards short positions could inadvertently foster a price surge. If the market remains buoyant, the funding costs borne by traders in short positions may become unsustainable, potentially causing them to close their bearish bets, which could induce a price rally known as a short squeeze.