Cardano (ADA) has experienced a swift recovery in price, rising to $0.54 after hitting a 50-day low of $0.43 on January 23rd. This rebound has sparked optimism among speculative traders, who are placing bullish bets on further gains. After a sell-the-news cycle that caused the global crypto market capitalization to shrink by over $270 billion between January 11th and January 23rd, the market has entered recovery mode. In this article, we will analyze the factors driving Cardano’s price recovery and the potential for a major breakout.
The past week has witnessed a significant uptick in the altcoin markets, with Layer-1 coins like Solana (SOL), Avalanche (AVAX), and Cardano (ADA) leading the rally. Between January 23rd and January 30th, Avalanche and Solana recorded 24.1% and 20.2% gains, respectively, adding a combined market capitalization of $14.9 billion. However, Cardano’s price increase of 16.2% to a $2.2 billion market cap suggests that it is trailing behind its rivals. Nevertheless, derivative market data trends indicate that ADA price could be preparing for a major breakout.
Derivatives traders have been placing unusually large bullish bets on Cardano’s price breakout. CoinGlass’s funding rates metric, which tracks changes in fees paid by futures contract holders, reveals a significant increase in funding rates for Cardano. The open-interest weighted funding rate for Cardano rose by 800% to reach 0.09% on January 30th, indicating that bullish speculative traders are paying record fees to keep their LONG ADA positions open. This surge in positive funding rate suggests that traders are betting big on ADA price, potentially catching up to its outperforming rivals, AVAX and SOL.
The historical data trend confirms that ADA price often sees a significant increase whenever the Cardano funding rate experiences comparable spikes. This on-chain perspective, combined with the bullish headwinds surrounding the altcoin markets, suggests that Cardano’s current price uptrend may continue. Furthermore, the Parabolic Stop and Reverse (SAR) technical indicator supports the bullish prediction. With the ADA Parabolic SAR dot pointing to $0.45 while the current price is $0.52, it indicates a growing bullish momentum. Traders may interpret this as a buying opportunity or a signal to go long in the derivatives markets, expecting further Cardano price appreciation.
If the bullish scenario unfolds, the bears may encounter initial resistance at the $0.55 milestone price. However, a decisive breakout could trigger margin calls and short squeezes, potentially driving ADA prices above $0.65 for the first time in 2024. On the other hand, the bears could invalidate this optimistic price forecast if ADA experiences a downswing below $0.40. Nevertheless, the support at $0.45, as indicated by the SAR chart, could prove to be a significant barrier for the bears.
Cardano’s price recovery and the significant increase in funding rates suggest that speculative traders are betting big on ADA’s potential breakout. The altcoin rally, led by coins like Solana and Avalanche, has added billions of dollars in market capitalization. However, Cardano’s price gains, although trailing behind its rivals, indicate the possibility of a major breakout. Historical trends, on-chain perspectives, and technical indicators support the bullish prediction. While potential resistance levels exist, a decisive breakout could lead to further price appreciation. However, the bears could invalidate this bullish scenario if ADA experiences a significant downswing. The coming weeks will reveal whether Cardano can live up to the expectations of speculative traders.
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