In this report, we dive deep into the market mechanics, historical price action, and potential strategies for navigating the Helium market.
HNT market context
When we last covered Helium (HNT), we discussed the importance of breaking out of the $5.525 level and the potential for this level to flip into a strong bid box.Initially, we had a bid box set down at $3, but with the current price action, it seems like the market has moved too far from that level to consider it relevant for now.
Even though the price has moved quite a bit away from $5.525, it’s not entirely out of the clear yet. This recent expansive move might still need a retracement, and the current area could be prime for that. If we look at the swing from the $3 low to the recent $8 high, we’re talking about a potential 50% pullback.
While the price may need to be pushed closer to $10 for a classic Fibonacci retracement, those don’t always work out perfectly.
For now, the key level to watch remains $5.525, as there is little evidence of any other significant price points. Historically, this level has been critical. It served as key support in January and was even deviated in December before Helium found a pathway to print higher. It’s also been a significant resistance level, and as we discussed last time, it recently wicked into it on August 11th. So, the focus is on this level.
Chasing price at this point isn’t advisable. The playbook here is all about patience—waiting for a retracement back down to the $6 or $5.525 area and then stacking spot positions.
Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.
Market mechanics
Now, let’s examine the current market mechanics. There isn’t much to cover, but there are some noteworthy points.- We’re seeing shorts build up above the $7.7 to $8 range, which suggests some exhaustion around those levels.
- When we look at Helium's volume, it’s interesting to note that there’s been a significant increase. Volume was around $2.10 million, but it has now jumped over threefold to around $7.42 million.
- Open interest has also ramped up similarly, indicating that some leverage has entered the market, though not at levels seen in the past—like on December 22nd, when open interest hit $34 million, or in September 2022 with $41 million.
- This year, we saw the highest open interest on March 14th at $9.35 million. While we haven’t hit any huge readings this year, it’s worth noting that open interest is slowly climbing back up to this year’s highs, although not to all-time highs.
- Another interesting point is the weighted funding rate, which is currently tilted towards the bearish side. This means shorts are paying longs to keep their positions open, indicating a bias toward selling in the market.
- Watching whether this leads to a price drop or triggers a short squeeze will be interesting. The $8 resistance level is critical, and how the price interacts with it could determine whether we see a move down into the $5.525 range.
Trading playbook
Hypothesis Helium’s price action around the $5.525 level is key. This area has shown significant historical support and could be a strategic point for accumulating positions if the price retraces.Key levels
- $5.525: Strong historical support and a key level to watch for potential accumulation.
- $8.00: Resistance level with significant short interest building up. How the price reacts here will be crucial.
Spot accumulation: The safest approach is to build spot positions within the $5.525-$6 range. This strategy avoids the risks of leverage and allows for holding through potential market swings.
Leverage strategy
If increasing exposure, consider light leverage with stop losses placed below $4.50. This strategy requires careful risk management, as the market could move against you.
Cryptonary’s take
Given the current market mechanics—such as the buildup of shorts above $7.7-$8, increased volume, and rising open interest—there’s a strong case for being patient and waiting for a pullback into the $5.525-$6 range.This could be a solid spot to accumulate, especially if we see a continuation of the upward trend or a short squeeze that drives prices higher.
Keep a close eye on how the market reacts around the $8 resistance level.
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