IOTA, an open source distributed ledger and cryptocurrency focused on the Internet of Things (IOT), saw its native IOTA token surge 43% on November 29 after announcing the creation of the Iota Ecosystem DLT Foundation and its registration in Abu Dhabi, the capital of the United Arab Emirates. This makes IOTA the first DLT foundation regulated by the Abu Dhabi Global Market (ADGM).
According to a press release from the project, the foundation will receive $100 million in IOTA tokens, which will be awarded over a four-year period and the announcement and funding plan were clearly perceived by traders as a short-term bullish catalyst.
Historically, incentives for ecosystems and developers through blockchain and DeFi protocols tend to attract liquidity to the project and increase sentiment among market participants.
In August 2021, Avalanche's AVAX token suffered a 1,400% drop after the announcement of the Avalanche Rush DeFi incentive program.
A similar result was seen with Trader Joe's JOE token in the months following December 2022, after the DeFi protocol announced plans to establish a presence on Arbitrum.
Currently, the Arbitrum ecosystem hosts liquidity and developer incentives and these initiatives align with the recent 62% resurgence in the ARB token price.
Was IOTA Price Movement Another News Selling Event?
On November 30, crypto derivatives data provider Coinalyze tweeted the following IOTA chart, noting that IOTA's "funding rate and long/short ratio" were at an "all-time low."
Funding rate and long/short ratio at historic lows! pic.twitter.com/wloZNoLMxu
โCoinalyze (@coinalyzetool) November 30, 2023
Funding rates and long-short ratios are often interpreted by traders as sentiment indicators and indicators of how active investors are positioned. In this context, traders perceive that a low funding rate reflects a crowded short position, and in these situations, a positive news or price event can quickly catalyze a rapid price reversal that drives short traders out of their positions.
Comparing the Coinalyze chart to a standard daily candlestick chart appears to reflect this dynamic, especially the high-volume buy candle on November 29.
Beyond the most recent price breakout, IOTA price was trading at a multi-year low and on the weekly period, the chart reflects a certain degree of disinterest in the project from a traders' perspective.
Cryptocurrencies have a long history of price increases leading to mainnet upgrades, multi-chain expansions, funding announcements, and developer incentives. Only time will tell if this is the case for IOTA.
This article does not contain investment advice or recommendations. Every investment and trading move involves risks, and readers should conduct their own research when making a decision.
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