Monero’s price maintains its upward trend, but high leverage risks a reversal

The Monero price continued its rally on Wednesday, hitting new multi-month highs as the market continues to show interest in privacy-focused assets.

At the time of writing, Monero was trading around $690, up 8% on the day, capping a sharp move that has boosted the token by more than 50% in the past week.

The rally comes as traders withdraw from rival privacy coin Zcash, which has seen high volatility following leadership departures and internal restructuring. With that rotation, Monero (XMR) has reaffirmed itself as the premier privacy trade on the market.

The privacy narrative continues to dominate the markets due to increased regulatory scrutiny, stricter controls on the use of cash and increased monitoring of financial activities. As a result, assets with standard privacy features, such as Monero, are still in high demand.

Leverage increases, increasing short-term risk

While spot demand has played a role, derivatives activity is now becoming a key factor. A January 13th analysis by CryptoQuant contributor Woominkyu shows that “overheating” bubbles are repeatedly forming in Monero futures volume during the recent price surge.

These bubbles appear after the price has already risen sharply, indicating that leverage is chasing momentum rather than building from accumulation zones. In previous Monero cycles, similar patterns often led to sharp volatility spikes.

In the short term, prices sometimes moved higher, but these moves were often followed by rapid pullbacks as leverage positions were forced to unwind.

Leverage tends to amplify in both directions. When the price rises, it accelerates profits. When momentum stagnates, it can quickly lead to liquidations, which can lead to sudden declines even within an otherwise bullish trend.

Technical analysis of Monero prices

Technically, Monero is still in an uptrend. The chart continues to show higher highs and lower lows, with the price remaining well above the former resistance zone around $500-520. That level has now turned into support, confirming acceptance of the breakout.

At the same time, the price is trading well above longer-term trend averages, putting XMR in a high deviation phase. Bollinger Bands begin to fan out, with prices pushing against the upper band.

That kind of pattern indicates strong momentum, but often precedes a volatility reset rather than a smooth continuation.

Momentum measurements reinforce this setup. The relative strength index rose in the mid-1980s, a zone that historically marked the later stages of strong moves. In previous cycles, similar conditions were resolved by sideways action or sharp pullbacks, not continuing upward without a pause.

Further upside potential is still possible if volatility remains in one direction and leverage is kept in check. In that situation, pullbacks are likely to be short-lived, with buyers stepping in around established support levels.

If futures positioning comes to an abrupt halt, downward movements may accelerate. A volatility spike could quickly push the price back into the $620-600 liquidity zone, or deeper towards trend support if liquidations gain momentum.