Key Takeaways
What caused MORPHO’s sudden 15% decline?
A $2.1 million derivative liquidation triggered heavy outflows, flipping the Funding Rate negative (-0.0174) and sending prices sharply lower.
Why are analysts still cautiously bullish?
Despite the drop, 95% of investors remain bullish, and liquidity clusters above $2 suggest prices could rebound as the market resets.
Morpho [MORPHO] led the market decline in the past 24 hours after the asset recorded a steep 15% price drawdown.
This decline occurred amid strong bullish sentiment that dominated the market days earlier, until a sudden reversal forced liquidity out of the market and sent prices lower.
Spot activity shows bullish intent
The recent decline came as a shock, as bullish sentiment still dominates several market segments.
In the spot market, for instance, data shows that investors made the largest single-day purchase of MORPHO on October 20, amounting to $16.11 million.
However, purchases have slowed today, with investors buying only about $485,000 worth of the asset.
Source: CoinGlass
Interestingly, Community Sentiment—a gauge that measures whether investors are bullish or bearish—has tilted heavily toward the bullish side of the market.
Over 95% of investors say they would buy MORPHO, and historically, such sentiment has aligned with price movements on multiple occasions.
Derivatives take the blame
The steep downturn in MORPHO’s price largely stems from activity in the perpetuals market.
Data from CoinGlass shows that market conditions turned against investors who attempted to long the asset while anticipating a rally.
The reversal began when contract closures reached $2.1 million in a single day.
Source: CoinGlass
Given MORPHO’s relatively small market capitalization of $31.31 million, this liquidation volume was large enough to sway market direction significantly.
Adding to the downward pressure was a drop in the Funding Rate, which fell into negative territory.
A reading of -0.0174 suggests that traders in the derivatives market have grown heavily bearish, implying that MORPHO could continue declining in favor of short traders who currently pay the funding fee.
Is it time to go short?
Despite the recent downturn, liquidation heat map analysis warns investors against opening new bearish positions.
Most liquidity clusters—represented in shades of green and yellow that typically act as price magnets—are positioned above the current price level.
Source: CoinGlass
Under normal market conditions, prices tend to gravitate toward these areas, suggesting that MORPHO could trend upward soon.
Based on these liquidity levels, the next potential target lies around the $2 region, where the last notable liquidity cluster appears on the chart.
Overall, the recent decline could represent a deliberate attempt to trigger stop losses and trap overleveraged traders before the market rebounds.
