Merlin Chain (MERL), a prominent Bitcoin layer-2 solution, has recently captured significant attention with an impressive surge in its on-chain activity and price, even as Bitcoin itself remained relatively stable. This notable rally is a testament to strong market interest, though underlying complexities suggest a nuanced outlook for its short-term trajectory.
Driving Momentum: A Dual Boost from Derivatives and Spot Markets
MERL experienced a substantial 16% price rally, accompanied by an increase to 173,800 token holders, largely propelled by a significant liquidity inflow into its derivatives market. The asset's perpetual Open Interest (OI) soared to an all-time high of $75.79 million, with a single-day expansion of approximately $27 million, predominantly driven by long positions. This bullish sentiment is further underscored by a taker Buy/Sell Ratio of 1.05, indicating strong buying pressure. Concurrently, spot market participants have been actively accumulating MERL, contributing to restricted supply. Although exchange outflows were modest at around $700,000, consistent net outflows coupled with a rising accumulation/distribution indicator (despite remaining negative overall) suggest sustained bullish interest from investors seeking entry points.
The Shadow of Volatility: Potential for a Price Pullback
Despite its recent robust gains, MERL faces inherent risks of a potential price pullback, as highlighted by its liquidation heatmap. This analytical tool reveals that MERL’s rally has cleared major liquidity zones above its current price, leaving the majority of liquidity clusters situated below. According to classical market behavior, such a configuration often indicates an increased likelihood of a short-term retracement, where the price may be drawn downwards to fill these underlying liquidity levels. While sustained bullish momentum could potentially defy this typical pattern, the current liquidity distribution points to a significant area of caution for traders and investors.
