SUI, the native coin of Layer-1 (L1) blockchain Sui Network, has been on a notable upswing lately, trading at $1.92 with a staggering 115% increase over the past month. However, this significant price growth is coupled with a rising short interest, suggesting that many traders remain cautious about its long-term potential.
SUI has experienced a notable increase in demand for short positions since early October, as indicated by its negative funding rate of -0.0012%. Funding rates are periodic fees that help ensure an asset’s contract price remains close to its spot price. A negative funding rate signals that traders are paying to maintain short positions, reflecting a bearish sentiment. During a price rally, negative funding rates indicate that short sellers dominate, opting to pay to keep their positions open despite rising prices.
This bearish sentiment is further reinforced by SUI's rising open interest, currently at $810 million—the highest since December 2023. Rising open interest typically suggests new positions are being opened, indicating increasing market participation. However, when paired with negative funding rates, it implies that many new positions are short, showcasing a continued bearish outlook.
Despite the strong interest in short positions, SUI's price continues to rise. If the negative funding rate persists while the price increases, a short squeeze could occur, forcing short sellers to buy back the asset, potentially driving the price even higher. If this scenario unfolds, SUI may be able to reclaim its all-time high of $2.18, last seen on March 27.
However, should demand for SUI decrease, a price correction might bring it down to $1.81. If selling pressure intensifies, this decline could extend to $1.52.
