The crypto market has been turbulent since news spread like wildfire that Pavel Durov, founder and CEO of Telegram and the driving force behind the $TON blockchain, had been detained in France.
The news of his detention, reportedly over allegations of failure to control content on Telegram, triggered a huge reaction in the $TON market. The price of $TON plunged 20% while open interest surged 55% on a spike in market activity dominated by short sellers and hedgers.
The abrupt decline in $ TON’s price has raised concerns among traders and analysts. The dramatic drop in value is substantial for a large-cap cryptocurrency like $TON, especially considering the nature of the news that caused it, according to crypto trader Daan.
The surge in open interest suggests that many traders are betting against $TON, likely expecting further declines. However, such a sharp reaction may be excessive. Market participants should exercise caution, particularly when dealing with rapid price movements.
TON Traders Warned Against Risky Strategies
Daan suggested that traders should be on the lookout for the “falling knife” strategy, which involves buying assets that rapidly lose value, hoping that the asset price will rebound. A chance exists that the new short positions might run into problems of either the market sentiment reversal or the momentum of the security becoming slow.
This possibility can cause a squeeze where the short sellers are compelled to buy back $TON at a higher price, which in turn causes the price to increase. However, in Durov’s detention context, which deals with regulatory and not criminal charges, it is likely that he can be released soon. With this, a release statement could mark the start of a positive reversal in $ TON’s price.
Historically, similar situations with high-profile figures have led to volatile price actions, often resulting in sharp rebounds once the initial shock wears off. For instance, past incidents involving Binance-related fears often saw price declines followed by recoveries once the uncertainty was resolved.
It should be remembered that there are various contexts in which market reactions can fail to be true. Despite the immediate news, the present market’s mood is reacting very quickly to detention, but it might also have other root problems. Therefore, an investor should expect erratic and fluctuating price movements for some time.
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