IOTA Token Surges Following Announcement of New DLT Foundation

In an exciting new development for the cryptocurrency world, IOTA, an open-source distributed ledger and cryptocurrency that concentrates on the Internet of Things (IOT), registered a staggering 43% rally for its native IOTA token on Nov. 29. This significant increase came hot on the heels of the announcement of the Iota Ecosystem DLT Foundation’s creation and its subsequent registration in Abu Dhabi, the capital of the United Arab Emirates. This landmark registration makes IOTA the first DLT foundation to be regulated by the Abu Dhabi Global Market (ADGM).

Development of the Iota Ecosystem DLT Foundation

The Iota Ecosystem DLT Foundation will be kickstarted with $100 million worth of IOTA tokens. This substantial amount will be vested over a four-year period. The announcement and the strategic funding plan have been welcomed by traders as a short-term bullish catalyst.

Typically, blockchain and DeFi protocols’ ecosystem and developer incentives draw liquidity to the project and positively affect the market players’ sentiment. For instance, in August 2021, the AVAX token of Avalanche saw a colossal 1,400% surge on making public its Avalanche Rush DeFi incentive program. We also saw a similar impact on Trader Joe’s JOE token in the months after its announcement to establish a presence on Arbitrum in December 2022. At present, the Arbitrum ecosystem is providing liquidity and developer incentives aligning with the recent 62% resurgence in ARB token price.

Intepreting IOTA’s Price Move

A crucial question remains: was IOTA’s price move another sell-the-news event? On Nov. 30, crypto derivatives data provider Coinalyze posted an intriguing IOTA chart, which noted that IOTA’s “funding rate and long/short ratio” were at a “historical low.” This information is salient because traders often interpret funding rates and longs-to-shorts ratios as a barometer of sentiment and an indication of how active investors are positioned. Given this, a low funding rate is generally seen as reflecting a crowded short position. In such scenarios, positive news or a price event can rapidly act as a catalyst for a speedy price reversal, essentially squeezing short traders out of their position.

Reflective of this dynamic is a comparison of Coinalyze’s chart to a standard candlestick daily chart, particularly evident in the high volume buy candle on Nov. 29.

IOTA’s Recent Performance

In addition to the most recent price breakout, prior to the jump, IOTA was trading at a multi-year low. The weekly timeframe chart suggests a certain degree of disinterest in the project from a trading perspective. Historically, cryptocurrencies tend to see price spikes coinciding with mainnet upgrades, multichain expansions, funding announcements, and developer incentives. Whether or not this is yet another instance, only time will tell.

Disclaimer

This article does not provide investment advice or recommendations. Every investment and trading move carries with it inherent risk, and readers are urged to conduct their own due diligence when making a financial decision.