XLM Drops 7% Amid Bearish Trend, Positive Sentiment Hints at Recovery

XLM, the native token of the Stellar network, has experienced a significant decline, dropping 7% in intraday trading to $0.249. This downturn is part of a broader bearish trend that has seen XLM's price fall over 25% since mid-May. The token recently lost a crucial support level at $0.26, intensifying bearish momentum amid ongoing geopolitical tensions that have left many investors cautious.

Despite the recent price drop, there are signs that a reversal may be on the horizon. Positive social sentiment and on-chain metrics suggest that traders are expecting a recovery. According to data from Santiment, the total weighted sentiment for XLM has shifted from -0.775 to +0.192 this week, with positive sentiment reaching 11.31 on June 17th, significantly outpacing negative sentiment of 0.81. This indicates a notable increase in positive conversations around XLM.

Additionally, the derivatives market for Stellar has seen a notable increase in Open Interest weighted funding rates, which have climbed from -0.378% on May 13th to +0.0029%. This shift is attributed to positive developments, such as efforts to integrate PayPal’s PYUSD stablecoin into Stellar’s network and a hint of an upcoming collaboration with EasyA. However, these factors have not yet translated into significant gains for the XLM price.

The liquidation heatmap for XLM indicates that the price is currently positioned near the bottom side of liquidity. A further breach southwards could trigger a long squeeze, potentially driving XLM price to significant lows. However, there are signs that geopolitical tensions may ease soon, particularly with the potential resolution of the Israel-Iran conflict. If this occurs, markets that have been under pressure could experience a reversal, providing support for XLM and potentially driving a price recovery.

The outcome of the FOMC meeting could also play a crucial role in determining the direction for both top coins and altcoins. If the situation leans towards the optimistic side, XLM may find support and begin to rise from the liquidity cluster around $0.25. This potential shift could provide the momentum needed for a price recovery, as traders' bias is slowly shifting towards an upside direction.