- Smart money participants in the market have halved their positions in PENGU, potentially due to weak fundamentals.
- Spot and derivative traders have followed suit. However, the possibility of a rally remains strong.
Pudgy Penguins’s [PENGU] momentum has continued to weaken following its 135% rally in the past month. Its 24-hour movement, a 1.94% price increase, clearly indicates a lack of sufficient market sentiment.
As analysts try to determine whether the rally will be sustained or if PENGU will drop further, AMBCrypto’s analysis shows that PENGU exhibits two-way price movement on the chart.
Smart money reduces exposure to PENGU
Smart money investors are known for strategic trading, buying assets at a discount and selling at a premium.
Currently, these investors have sold 33% of their PENGU tokens, suggesting they are exiting at a profit.
Further analysis reveals that this decline began after a smart money wallet, labeled ‘Sigil Fund,’ sold 52 million PENGU tokens. This event preceded PENGU’s price halving.
Source: Nansen
Movements like this often inspire a lack of confidence among investors, which has been observed across several top wallets.
The spot market has reflected this growing bearish sentiment.
At the time of writing, Exchange Netflows have turned positive for the first time since the 27th of April.
This shift indicates that sellers are moving their assets from private wallets to exchanges, with approximately $318,000 in PENGU sold so far.
When smart money and spot traders both begin selling simultaneously, it typically signals that a major price drop could be underway as market sentiment turns against the asset.
Funding Rate confirms bearish sentiment
The Funding Rate (FR)—a measure of the cost of holding futures positions—confirms the market’s bearish sentiment.
In the past 24 hours, the total FR has turned negative, at -0.0038%.
Source: Coinglass
This means that short traders currently hold the majority of unsettled Futures contracts and are paying a premium to maintain their positions.
As long as these sellers continue paying, it suggests that the market remains in their favor and that the price could continue to trend lower.
On OKX, the selling volume has remained dominant with a reading of 0.93, while Binance traders show a similar position with a ratio of 0.9613.
A bullish roadmap ahead
Despite the bearish momentum, the drop in PENGU appears to be positioning the asset for a significant price rally in the coming days, according to technical analysis.
The drop began after the price tested the resistance level of the bullish triangle pattern in which PENGU currently trades.
This bullish triangle structure typically sets the stage for upward movement, with prices expected to rise at least to the peak of the pattern.
Source: TradingView
For PENGU’s rally to begin, its price must drop to the $0.010559 support level, which forms the base of the pattern.
If PENGU retests this zone, it could trigger a 42.44% surge from that level.
Currently, smart money and spot traders appear to be coordinating sales to push the price lower. This strategy allows for discounted accumulation before a potential major upward move.
