Cardano (ADA) Shorting Activity Spikes as the Coin\'s Price Drops 20% in a Month

Cardano's [ADA] 20% price decline in the last month has led to a surge in the demand for short positions among its futures market participants.

Cardano [ADA] futures saw a massive demand for short positions throughout May, as the coin’s price decline of 20% prompted traders to bet against its recovery.

According to data from Santiment, 19 June saw ADA’s highest shorting versus longing ratio since September 2023.

The coin closed that day with a funding rate of 0.0031%. Still negative at press time, ADA’s funding rate was 0.008%.

Funding rates are used in perpetual futures contracts to ensure the contract price stays close to the spot price.

When an asset’s funding rate is positive, its contract price is higher than its spot price, and more traders hold long positions.

Conversely, when an asset’s funding rate is negative, more traders are holding short positions. This means that more traders are expecting the asset’s price to fall than there are traders buying the asset with the expectation of selling at a higher price.

ADA’s short positions may have signaled a hidden bullish divergence, according to a post by Santiment on X, which stated,

“This is a good sign for patient bulls, as liquidated shorts can effectively act as ‘rocket fuel’ for continued price rises.”

However, this has not yet occurred. ADA’s price has found new lows as there have been more long liquidations than short ones so far.

According to data from Coinglass, ADA long liquidations reached $2.86 million on 18 June, marking the highest single-day liquidations since 13 April.

In an asset’s derivatives market, trades are liquidated when a trader’s position is forcefully closed due to insufficient funds to maintain it.

Long liquidations happen when an asset’s value drops unexpectedly, forcing traders with open positions in favor of a price rally to exit.

Demand for ADA may continue to fall as the coin’s price drops. According to an analysis by AMBCrypto, the altcoin’s Relative Strength Index (RSI) was at 33.53.

This key momentum indicator measures an asset’s overbought and oversold conditions by tracking its price changes.

It ranges from 0 to 100, with values above 70 indicating that the asset is overbought and likely due for a price correction. In contrast, values below 30 suggest that the asset is oversold and may soon experience a rebound.

At 33.53, ADA’s RSI showed that selling pressure was outpacing buying activity among market participants. If the downtrend continues, ADA could fall to trade at 0.35.

This will be invalidated if bullish bias toward the coin increases dramatically and demand rises. In that case, the coin could rally to $0.41.

News source：https://www.kdj.com/cryptocurrencies-news/articles/cardano-ada-shorting-activity-spikes-coin-price-drops-month.html

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