TIA Cryptocurrency Surges 25% Amid Sceptical Short Bets

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Celestia’s native cryptocurrency, TIA, has surged 25% to $7.30 this week, marking the most significant gain among the top 100 digital assets by market value. Despite this impressive performance, traders remain skeptical, engaging in bearish bets by shorting perpetual futures linked to the cryptocurrency. According to funding rates monitored by CoinGlass, average funding rates across exchanges turned negative over the weekend and have since plummeted to -0.1231%, levels last observed in January. This indicates a strong bias for bearish bets, not seen in six months.

Funding rates, which represent the cost of holding bullish or bearish positions, are calculated and updated every eight hours. A negative rate means that traders with short positions, betting on a price decline, are paying a funding fee to those with long positions. This occurs when there’s a significant demand for short positions compared to long ones.

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The inclination to short TIA amid a price rally appears to be a classic case of recency bias. Traders are seemingly placing more emphasis on TIA’s recent price crash, which saw an 80% drop from $21 to under $5 over a five-month period, rather than other crucial developments. Therefore, it’s not entirely unexpected to see traders selling into the bounce.

However, traders might be underestimating the significance of modular blockchain Celestia’s function as a data availability layer for layer 2 networks, such as the growing permissionless liquidity layer for Web3 trading, Orderly Network. This role suggests that the price bounce may have legs.

“Pseudonymous analyst DeFi^2, discussed on X, ‘The need for a data availability layer here makes sense after realizing that safe/permissionless liquidity is one of the major hurdles in making onchain perpetual markets usable. So, having a middle layer that can provide shared liquidity to any exchange seems like an obvious forward step.'”

Celestia, a modular blockchain, separates consensus from execution to enhance scalability. It acts as a data storage system for rollups and layer 2 networks, facilitating faster processing and increased transaction handling capacities. Orderly Network, a permissionless liquidity layer and infrastructure provider for Web3 trading built on the Near blockchain, leverages Celestia for data availability. On July 5, Orderly Network’s cumulative trading volume hit a record $6.2 billion, with net fees exceeding $6.6 million, accounting for 40% of the total data posted on the Celestia network, according to an email from the network to CoinDesk.

The bias for short positions could potentially prompt a further price rise. The funding fees that traders holding shorts are currently paying might become unsustainable if prices remain stable, eventually forcing them to close their bearish positions. This could trigger a price increase in what’s known as a short squeeze rally.