On-chain analytics firm Santiment has recently revealed that Cardano (ADA) is among the altcoins that could potentially see price jumps in the near future. This information was shared in a post by Santiment discussing the altcoins that are currently being heavily shorted on the derivatives market. The key indicator examined in this analysis is the Funding Rate, which tracks the fee that derivatives traders exchange with each other periodically.
A positive value of the Funding Rate indicates that long contract holders are paying a premium to short investors to hold onto their positions, implying a bullish sentiment in the market. Conversely, a negative value suggests that short holders outnumber long ones, indicating a bearish mentality prevailing in the market. Santiment specifically looked at the Funding Rate for the cryptocurrency exchange Binance, the largest platform by trading volume, which is expected to reflect trends on other major exchanges as well.
The chart shared by Santiment shows that Cardano, along with Chiliz (CHZ) and Fantom (FTM), has had a negative Binance Funding Rate for the past five weeks. This continuous shorting against these altcoins historically has had a positive impact on their prices. The concept of a “liquidation squeeze” is also discussed, where a sharp price move results in the liquidation of a large number of contracts, fueling further price movement and triggering more liquidations.
Looking back at earlier instances of aggressive shorting in the year, Cardano, Chiliz, and Fantom experienced a surge in their prices following the bearish sentiment. Cardano saw a 10% increase, Chiliz 32%, and Fantom 49%. Based on this trend, it is possible that short liquidations could occur again for these altcoins, potentially leading to a rally in their prices in the near future.
As for the current price of ADA, Cardano had previously surpassed the $0.45 mark but has since retraced, now trading around $0.39. It will be interesting to see how the market dynamics and short liquidations play out in the coming days and whether Cardano, Chiliz, and Fantom see a similar price surge as seen in the past. With the Funding Rate indicating bearish sentiment, traders and investors will be closely monitoring these altcoins for potential price movements and trading opportunities.
