Cardano (ADA) has recently experienced a significant recovery in its price, rising to $0.54 after hitting a 50-day low of $0.43 on Jan. 23. Speculative traders are now betting on further gains, fueled by a positive outlook across the altcoin markets. This article will explore the reasons behind Cardano’s quick rebound and analyze the potential for a major breakout.
After a two-week period of active Bitcoin ETFs trading, the crypto market faced a sell-the-news cycle that resulted in a decrease of over $270 billion in global crypto market capitalization between Jan. 11 and Jan. 23. However, the market has started to recover, with a $180 billion uptick in the past week. This recovery has instilled optimism in the altcoin markets, with Layer-1 coins like Solana (SOL), Avalanche (AVAX), and Cardano (ADA) leading the current rally.
While Avalanche and Solana have gained 24.1% and 20.2% respectively, resulting in a collective market capitalization increase of $14.9 billion between Jan. 23 and Jan. 30, Cardano is trailing behind with a 16% jump. Despite this, derivatives traders are placing unusually large bullish bets on Cardano’s imminent price breakout, suggesting that ADA could catch up to its rival coins.
CoinGlass’s funding rates metric provides insights into market dynamics and sentiment among traders. Positive funding rates occur when LONG position holders pay short traders to keep their positions open, anticipating a price increase and larger profits. On Jan. 30, Cardano’s open-interest weighted funding rate rose by 800% to reach 0.09%, following an average of 0.01% since Jan. 2. This significant increase indicates that speculative traders are betting big on ADA’s price, potentially competing with AVAX and SOL.
The historical data trend shows that Cardano’s price has often experienced upward movements whenever the Cardano funding rate recorded similar spikes. From an on-chain perspective, the current price uptrend can be attributed to bullish headwinds in the altcoin markets. The rising funding rates could further propel Cardano’s price.
The Parabolic Stop and Reverse (SAR) technical indicator supports the prediction of Cardano’s price surge. When the SAR dot points below the asset’s current price, it indicates a growing bullish momentum. In this case, the ADA Parabolic SAR dot is pointing to $0.45, while the current price is $0.52, aligning with the bullish on-chain prediction. Traders may interpret this as a buying opportunity or a signal to go long in the derivatives markets, anticipating further price appreciation for Cardano.
If the predicted scenario unfolds, the bears could face initial resistance at the $0.55 milestone price. However, a decisive breakout could trigger margin calls and short squeezes, potentially sending ADA prices above $0.65 for the first time in 2024. Conversely, the bears could invalidate this optimistic price forecast if the price falls below $0.40. Nevertheless, the support level at $0.45 could prove to be a significant obstacle for a downward trend.
Cardano’s quick recovery and recent surge in price have attracted speculative traders who are now placing large bullish bets on ADA. The rising funding rates and the support from the Parabolic SAR indicator suggest a potential breakout could be on the horizon. While resistance levels may pose challenges, Cardano enthusiasts remain optimistic about the possibility of ADA reaching new highs. As always, it is essential to remain cautious and monitor market developments closely to make informed investment decisions.