Toncoin (TON), a cryptocurrency associated with the popular Telegram platform, has surged 34.50% month-to-date to reach $8.33 on June 14. Nonetheless, owing to a mix of bearish catalysts, it now risks a sharp correction during the remainder of the month.
TON price nears overbought territory
The ongoing run-up in the Toncoin market has pushed its daily relative strength index (RSI) to 67.87— roughly two points below the overbought threshold of 70. This signal has typically preceded sharp TON price pullbacks, as shown below.
More downside cues come from the TON price testing a multi-week horizontal trendline resistance. Should a correction ensue, the next downside target will likely be the support confluence comprising an ascending trendline and the 50-day exponential moving average (50-day EMA; the red wave) at around $6.55.
In other words, TON could decline by 20% by June's end.
Toncoin's rising OI meets plunging funding rate
The ongoing price growth in the Toncoin market coincides with a sharp rise in its futures' open interest (OI). Notably, it has risen to $239.38 million on June 14 from its local low of $192.25 million two days ago.
Nonetheless, TON's funding rate is negative at -0.22% per week and has been below zero since June 12. In the same period, the spot price of TON has surged by circa 18.50%.
A negative funding rate indicates that short positions are paying long positions, suggesting that there are more shorts than longs in the market. In other words, most futures traders are expecting a price decline or are hedging against potential drops.
While rising OI and price indicate a strong bullish trend, the negative funding rate and high RSI indicate caution. If shorts cover their positions and the buying pressure decreases, a reversal or consolidation might occur, which could result in a significant price drop.
TON's ascending triangle breakout in July?
TON's anticipated correction in June is part of a consolidation trend occurring inside what appears to be an ascending triangle bullish continuation pattern.
As a rule of technical analysis, an ascending triangle resolves after the price breaks above its upper trendline and rises by as much as the maximum distance between its upper and lower trendline. TON is now nearing the triangle’s apex point, thus increasing its possibility of undergoing a breakout move soon.
Should a breakout happen, TON's upside target will be at around $13.30, up approximately 65% from the current price levels, in July.