Cardano: An Altcoin with Potential Price Surges
Recently, on the X platform, Santiment discussed the altcoins facing heavy shorting on the derivatives market. The key metric being analyzed is the Funding Rate, which indicates the fee that derivatives traders pay or receive periodically. A positive value suggests a bullish sentiment, with long contract holders paying a premium to short investors. Conversely, a negative value indicates a bearish sentiment, with short holders dominating over long ones.
Santiment’s Analysis on Funding Rate
- The Funding Rate was specifically examined for the Binance cryptocurrency exchange, the largest platform in terms of trading volume.
- A chart shared by Santiment depicts the Funding Rate trend for three altcoins over recent months.
The Impact of Shorting on Altcoins
A “liquidation squeeze” can occur when a significant price movement leads to the liquidation of numerous contracts simultaneously, amplifying the initial move. This phenomenon has been observed in the shorting of Cardano, Chiliz, and Fantom.
Potential Price Rally
Historically, high levels of shorting in these altcoins preceded price surges. For instance, Cardano experienced a 10% increase, Chiliz 32%, and Fantom 49% after facing heavy shorting. This pattern suggests the possibility of another round of short liquidations triggering a price rally for these altcoins.
ADA Price Movement
Cardano recently surpassed the $0.45 threshold, but its price has retraced to around $0.39. Despite the temporary setback, the potential for a price rally following short liquidations remains.
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