On-chain analytics firm Santiment has revealed Cardano (ADA) is one of the altcoins that could likely see price jumps shortly.
Cardano Among Altcoins That Are Being Heavily Shorted Right Now
In a new on X, Santiment has talked about the altcoins being shorted against on the derivatives market. The indicator of relevance here is the “Funding Rate,” which keeps track of the periodic fee that derivatives traders have to exchange with each other.
When the value of this metric is positive, it means the long contract holders are currently paying a premium to the short investors to hold onto their positions. Therefore, this kind of trend implies the presence of a bullish majority sentiment in the market.
On the other hand, the negative indicator suggests the short holders outweigh the long ones right now, and as such, a bearish mentality is the dominant one in the sector.
In the current topic, Santiment has referred to the Funding Rate specifically for the cryptocurrency exchange Binance, which is the largest platform by trading volume and should, thus, represent the trend on other large exchanges.
Here is the chart shared by the analytics firm that shows the trend in this indicator for three altcoins over the past few months:
As is visible in the above graph, all three of Cardano, Chiliz (CHZ), and Fantom (FTM) have seen their Binance Funding Rate stay inside the negative territory for the past five weeks, implying that investors have continuously been betting against a bullish outcome for them.
Historically, such aggressive shorting against any asset has positively affected its price. This is because a liquidation squeeze is more likely to affect the dominant side of the market right now.
A “liquidation squeeze” is an event where a sharp move in the price liquidates a large amount of contracts at once. These liquidations feed back into the move that caused them, thus amplifying it and kicking off a cascade of further liquidations.
The chart shows that these three altcoins had also seen a similar level of shorting earlier in the year. What followed this bearish sentiment was a surge in their prices. Cardano saw a 10% surge, Chiliz 32%, and Fantom 49%.
Thus, going by this trend, it’s possible that short liquidations could once again happen for these altcoins and lead to a rally in their prices.
ADA Price
Cardano had broken past the $0.45 mark earlier, but the asset appears to have plunged since then, as its price is now trading around $0.39.
