Unpacking the Sudden Surge in AXS Token Price: A Technical or Fundamental Move?

The cryptocurrency market is no stranger to volatility, and Axie Infinity’s native token, AXS, recently served as a vivid example. The token experienced a dramatic surge, skyrocketing by over 20% within just an hour, creating a significant green daily candlestick with a long upside wick. While the price has since moderated, it’s an event that has everyone asking: what triggered this sudden rise?

The Timeline: A Closer Look at the Price Movement

On September 11, AXS began a noticeable upward trend after hitting lows last seen in June 2021. The daily Relative Strength Index (RSI) dipped below 30, signaling an oversold condition, which often acts as a precursor to a price rebound. True to form, AXS started rallying, and in today’s trading session, it peaked at $5.15 from a low of $4.22.

As of the time of writing, the token has given back some of its gains but is still trading up 9.37% over the last 24 hours at $4.61.

Short Squeeze or Something Else?

In the absence of any significant announcements or upgrades from Axie Infinity’s official channels, market pundits are pointing to a technical rather than a fundamental cause for the surge. The most likely explanation seems to be an unexpected short squeeze—a phenomenon that occurs when the price of an asset jumps sharply, primarily due to excessive short selling.

The theory of a short squeeze gains credence from the fact that $1.41 million worth of Axie Infinity positions were liquidated in the last four hours, of which a substantial $798,420 came from short positions.

Trading Volume: An Indicator of Market Interest

The spike in AXS price wasn’t the only indicator of increased activity. Trading volumes for the token swelled by a remarkable 343% in the last 24 hours, with more than $100 million traded. This shows that traders rushed in to either capture gains or mitigate losses, adding liquidity and volatility to the AXS market.

What Does This Mean for AXS and the Crypto Market?

While the recent price surge might not be directly attributable to any fundamental changes in Axie Infinity or its token, AXS, the event serves as a reminder of the inherent volatility and unpredictability in the cryptocurrency market. It also underscores the potential for technical factors like short squeezes to dramatically influence price, independent of broader market trends or specific news.

As always, such incidents serve as cautionary tales for traders and investors, highlighting the importance of risk management and due diligence in the ever-volatile crypto landscape.