Buybacks Boost SKY, But Overbought Signs Spark Sell-Off Fears

Sky's SKY token has experienced a recent 10% surge, raising questions about whether the move is a bullish breakout or a potential trap masked as momentum. The recent rally coincided with a surge in derivatives activity, including a record high in Open Interest, which reached $2.33 million within 24 hours, a 27% increase from the prior day [3]. This has triggered speculation about whether the uptrend can be sustained, particularly in the face of weakening spot liquidity and mixed technical indicators.

The recent movement in SKY has been heavily influenced by activity in the derivatives market. The long-to-short ratio for the token has surged to 1.14, indicating that buying pressure has outweighed selling pressure in the derivatives segment [3]. However, this optimism appears at odds with broader market trends. Spot trading has seen five consecutive days of outflows, totaling $1.67 million in sales, suggesting that liquidity is increasingly being withdrawn from the token [3]. This divergence between derivatives and spot markets has raised concerns among analysts, with some cautioning that the recent price action may not hold as liquidity tightens.

Technical indicators also suggest caution. The Relative Strength Index (RSI) for SKY has entered the overbought territory, with a reading above 70, signaling that the token may be due for a correction [3]. Meanwhile, the Money Flow Index (MFI) is approaching the overbought threshold of 80, reinforcing the idea that a reversal could be on the horizon. These indicators suggest that while SKY’s recent price move appears strong, the momentum may be fragile and susceptible to a sharp decline.

The token has also broken through a descending resistance line it had been trading under for weeks, moving closer to a key level of $0.078 [3]. Analysts have used Fibonacci retracement levels to identify potential reversal points should the price continue upward. However, considering the ongoing liquidity outflows and the overbought conditions in key indicators, the likelihood of SKY reaching those levels appears limited. The price is more likely to face resistance before reaching these levels, with a potential reversal expected sooner rather than later.

Sky itself has been actively managing its token supply through a buyback program. Since launching in late February 2025, the project has spent $75 million on buybacks, using its stablecoin USDS to repurchase 73 million SKY tokens [1]. This has led to an 8.1% increase in the token’s price over the same period. However, this performance has not outpaced some of its peers. For example, Uniswap’s UNI and Aave’s AAVE have seen gains of 6% and 25.8% respectively since the buyback program began [1]. The effectiveness of Sky’s buybacks, therefore, remains a topic of debate, particularly in light of the recent volatility.

As the market watches SKY closely, the broader crypto landscape remains in flux. Other projects have also adopted buyback strategies, including Pump.fun, which has spent $66.5 million on its token buyback program, and World Liberty Financial, which has proposed using protocol fees for token buybacks [1]. These moves highlight a growing trend in the industry to manage token supply and support prices, though their long-term effectiveness remains to be seen. With SKY’s recent performance and technical indicators flashing mixed signals, investors will need to weigh the immediate momentum against broader liquidity and market sentiment trends.

Source:

[1] Sky's $75M buyback plan boosts SKY token 8% in 6 months (https://cointelegraph.com/news/sky-75m-token-buyback-plan-sees-8-percent-gain)

[2] What is Sky (SKY)? - Help - Luno (https://guide.luno.com/hc/en-gb/articles/29084663104285-What-is-Sky-SKY)

[3] Is SKY's 10% surge a bull trap in disguise? Marking major ... (https://ambcrypto.com/is-skys-10-surge-a-bull-trap-in-disguise-marking-major-levels/)