MERL topping signal emerges? On-chain data reveals short-term correction risk

Merlin Chain (MERL) as a Bitcoin layer-two solution has recently attracted significant market attention with its upward performance. As of the latest data update, MERL is priced at $0.24, with a 24-hour increase of +2.74%. The number of holding addresses has reached 324,131, reflecting a steady expansion of the user base. However, behind this rally, some key indicators are signaling different messages—there is a brewing risk of a short-term pullback.

Derivatives Amplify the Rally, but Caution Against Bubbles

MERL’s recent strong performance is closely linked to enthusiasm in the derivatives market. Data shows that the open interest (OI) in MERL perpetual contracts once hit a record high of $75.79 million, indicating that bullish traders are actively building positions. The daily OI increase was about $27 million, a scale of inflow that typically reflects market sentiment reaching relatively high levels.

Trading activity data also confirms this—receiver buy/sell ratio is 1.05, indicating buyers are exerting continuous pressure. On the surface, these figures point to strong bullish momentum. However, caution is warranted—when derivatives market liquidity pushes prices higher, it often also sets the stage for subsequent corrections. Highly leveraged positions, once triggered for liquidation, can easily trigger chain reactions.

Spot Accumulation Lacks Strong Support

Compared to the hot derivatives market, spot market performance has been relatively restrained. Over the past 24 hours, exchange withdrawals amounted to about $700,000, which is not particularly strong—this relatively small outflow suggests that holders’ accumulation intentions have not reached high levels as expected.

More importantly, the accumulation/distribution indicator has risen but remains in negative territory. This reveals an important message: recent buying pressure has not fully offset previous selling pressure. In other words, spot market participants are still cautious about this rally, lacking strong consensus support.

Liquidation Heatmap Reveals Risks

Examining the liquidation heatmap provides a more intuitive understanding of price risks. Currently, MERL’s price has cleared the major liquidity clusters above, while large liquidity gaps now exist below the current price—this is a classic signal of potential correction.

According to market microstructure theory, a lack of liquidity above and dense liquidity below typically indicates a downward seeking of liquidity. While not an absolute prediction, when bullish momentum begins to weaken, this structure can easily evolve into a genuine pullback.

Short-term Pullback Probability Rises, but Not Inevitable

Based on the above analysis, MERL indeed faces a short-term correction risk:

• High OI in derivatives means that triggering large liquidations could accelerate downward movement
• Spot support is limited, lacking strong institutional endorsement
• The liquidation heatmap shows dense liquidity below, indicating a tendency for price testing downward

However, it is important to emphasize—such a correction is not guaranteed. If bullish momentum continues to strengthen or new positive catalysts emerge, the price could also break above resistance. Traders should closely monitor OI trends, inflow/outflow data, and key technical levels to prepare for both scenarios.

Currently, MERL’s situation can be summarized as: bullish enthusiasm in derivatives contrasts with cautiousness in the spot market, while the liquidation heatmap suggests that any breakout in either direction could be accompanied by significant volatility.