Author：Encryption Jianghu
Privacy-themed crypto assets surged to record highs in the fourth quarter, with Zcash leading the way.
With investors actively chasing clear narratives in the market, significant capital rotated into privacy coins. While other tokens surged, Monero made little to no gains through this period.
However, market sentiment shifted drastically after Zcash [ZEC] faced leadership challenges and rotation. As a result, investors stepped back from ZEC and started rotating capital into Monero [XMR], as reported earlier by AMBCrypto.
Monero cools down amid capital rotation
After rallying to a new all-time high of $800, Monero retraced and slipped to a local low of $657.
At the time of writing, XMR traded at $674, down 2.43% on daily charts. Before these losses, XMR had been on an upward trajectory, hiking 47% on weekly charts.
Over the same period, Monero’s market cap dropped from a high of $14.5 billion to $12.4 billion. This marked a $2.1 billion drop, which suggested a massive capital outflow from Monero.
Why did Monero slip?
Monero recorded a mild pullback after sellers jumped into the market with strength and funds exited in large numbers. As a result, both long‑term holders and short‑term investors took profits.
CoinGlass data shows Spot Netflow turned positive at $5.4 million on the 15th of January, before reversing to ‑$362,000 the very next day.
Such a massive jump indicated intensive downside pressure as more funds flowed out of the asset. Often, higher inflows into exchanges have preceded lower prices as downward pressure intensifies.
The same market behavior emerged on the futures side as investors started to reduce exposure. In fact, at press time, Futures Inflows fell from $1.7 billion to $285.9 million, while Outflows rose to $287.79 million.
As a result, Futures Netflow dropped 106.59% to -$1.89 million from $41 million recorded three days earlier.
Monero whales jump into Futures
Interestingly, as the market retraced, whales jumped into the Futures market and opened both short and long positions at a discount.
According to Onchain Lens, a whale deposited $3 million into HyperLiquid and opened 5x short positions on 1,838.06 XMR worth $1.27 million.
Another whale deposited $2.27 million into HyperLiquid and opened a long XMR position with 2x leverage. Usually, when whales take such positions, it suggests the use of leverage to maximize upside once the retrace ends.
Is this a mere pullback for XMR?
Monero rallied as capital rotated out of Zcash and flowed into XMR and other more stable privacy-centered coins.
However, the altcoin retraced as sellers stepped in with strength and cashed out, which weakened the bullish structure.
At press time, the Relative Strength Index (RSI) fell from 87 to 79, indicating seller emergence into the market. Likewise, its Stochastic Momentum Index made a bearish crossover and dropped from 86 to 52, indicating strengthened downside pressure.
These market conditions leave XMR in a risky position for further losses. Thus, if sellers continue to offload, Monero will go towards $518.
Conversely, if the current upside momentum rebounds, XMR will reclaim $754 and eye another ATH.
Final Thoughts
- Monero slipped from its $800 ATH to a low of $657, then rebounded slightly to $674 at press time.
- XMR retraced after a recent explosive rally as profit takers emerged and futures contracts reduced exposure.
