Celestia, a data availability blockchain network, has witnessed its native cryptocurrency TIA token ascend 25% to $7.30 this week, marking the best performance among the top 100 digital assets by market capitalization. This surge has left traders wary, leading them to take bearish positions by shorting perpetual futures tied to TIA, as observed through funding rates monitored by CoinGlass.

Over the weekend, average funding rates across exchanges turned negative, plummeting to -0.1231%, a nadir not seen since January. This indicates a strong bias for bearish bets over the past six months. Funding rates, calculated and gathered from traders every eight hours, reflect the cost of holding long or short positions. A negative rate signifies that traders with short positions, anticipating a price drop, are paying a funding fee to those with long positions. This occurs when demand for short positions outstrips that for long positions.

The preference for shorts during a price rally seems to be a textbook example of recency bias, where traders place more significance on TIA’s recent price crash than on other crucial developments. TIA’s latest upswing follows a five-month decline that saw prices plummet 80% from $21 to under $5. Consequently, it is not surprising to see traders selling the rebound.

However, traders might be overlooking the pivotal role of modular blockchain Celestia as a data availability layer for layer 2 networks like the burgeoning permissionless liquidity layer for Web3 trading, Orderly Network. This could imply that the price rally is sustainable.

“The necessity for a data availability layer here becomes evident upon realizing that safe, permissionless liquidity is one of the most significant hurdles in making onchain perpetual markets functional. Thus, having an intermediary layer that provides shared liquidity to any exchange appears to be an obvious solution moving forward,” elucidated pseudonymous analyst DeFi^2 on X.

“As a core piece of infrastructure for scenarios like this, Celestia has numerous favorable factors converging this week for a robust market bottom, including the Modular Summit with Celestia at its epicenter,” DeFi^2 added.

Celestia, a modular blockchain, decouples consensus from execution, enhancing scalability. It operates as a storage system for data utilized by rollups and layer 2 networks, aiding them in becoming faster and handling more transactions.

Orderly Network, a permissionless liquidity layer and infrastructure provider for Web3 trading built atop the Near blockchain, leverages Celestia for data availability. On July 5, Orderly Network’s cumulative trading volume reached a record $6.2 billion, with cumulative net fees surpassing $6.6 million, accounting for 40% of the total data posted on the Celestia network, as per an email from the network to CoinDesk.

Furthermore, the predisposition for short positions could act as a catalyst for further price appreciation. The funding fee currently paid by traders holding shorts could become burdensome if prices remain resilient, eventually compelling them to close their bearish positions. This, in turn, could drive prices higher in a phenomenon known as a short squeeze rally.