RaveDAO (RAVE) is currently one of the hottest tokens in the crypto market. Within a little more than a week, its price had risen some 6,000%, starting at about $0.25 and soaring to nearly $19 before pulling back to around $15 at press time.
While RAVE’s price surge has been expeditious, brutal, and difficult to overlook, behind the figures, there is a more complicated narrative of the organisation of this rally.
A Momentum and Volatility-fueled Rally
On the surface, RAVE looks like a textbook breakout in terms of its performance. The token has increased by over 5,500% in the last month, the majority of it within several days. It has increased by more than 4,000% in the past week alone, momentarily surpassing an all-time high of approximately $19.54, and then dropping.
Price fluctuations have been equally dramatic. In just seven days, RAVE traded as low as $0.36 and as high as over $19. Such a range underscores the instability of the present environment, how much of an opportunity there is.
There has also been a high level of trading activity. The volume has been high every day, with a high of over $300 million. This degree of activity indicated traders are not merely holding long-term but are actively moving in and out of positions.
Meanwhile, RAVE has been able to ascend to the 30th largest altcoins, performing better than most of the rest of the market. This is especially significant since Bitcoin has been fairly bullish, with the price holding above $74,000 even as many altcoins fail to gather momentum.
The question that should be questioned with that divergence is why is it that RAVE is moving aggressively when a lot of the market is not?
What Liquidity and Leverage Reveal
To understand RAVE’s rally, it helps to look beyond the spot market and focus on the derivatives market.
Following the recent pullback after the token hit $19.54, over $43 million of long positions were liquidated. This is a pretty large amount, ranking RAVE among the largest liquidations.
This is important since liquidations do not merely indicate volatility, but can cause it. By being forced to close positions, short sellers become buyers in effect. That pressure of buying drives the price up, which can cause further liquidations in a domino effect. This is commonly known as a short squeeze, and it seems that it contributed significantly towards the swift rise of RAVE.
Another layer to the story is liquidity conditions. The fraction of the overall stock of tokens actively traded is relatively low, and this implies that the price can shift quite sharply even in the presence of moderate inflows. Big swings can be formed in such an environment with little effort.
An increasing amount of focus is also given to the concentration of the supply of tokens. Statistics indicate that a few wallets control a large proportion of the total tokens, in one calculation up to 90%. Although that does not necessarily imply any particular direction, it at least implies that, with a few large holders potentially making a significant shift, the price could be noticeably affected.
Low available supply, high leverage, and ownership concentration all result in a highly sensitive market structure. It is able to multiply gains, but it can also de-multiply.
RaveDAO (RAVE) Market is Still in the Discovery Phase
Another striking observation that can be made with regard to the rally of RAVE is the fact that it had no specific underlying trigger point. It has not launched any major product or been known to have developed anything major that justified the magnitude of the move.
Rather, positioning and momentum seem to be the major factors that influence the price action. The move itself, and not a certain piece of news or long-term narrative, is what traders are responding to.
It does not make the rally any less real, but it does influence the way it is to be interpreted. When market forces dominate the determination of price, it will act in a different manner than when a price action is supported by sound fundamentals.
At present, RAVE is still in a stage of high price discovery. The trend has not changed, although leverage, liquidity gaps, and concentrated holdings are the same factors that contributed to the trend that make it unpredictable.
