- Demand for ADA Short Positions is on the rise.
- It is due to a steady decrease in coin value.
Cardano’s [ADA] A 20% drop in price in the past month led to an increase in demand from participants on the futures markets for short positions.
Data from SantimentOn the 19th of June, ADA recorded its largest shorting versus averaging ratio since September 20,23.
The funding rate was 0.0031% when the coin closed on that particular day. At press time, ADA funding rate was 0.008%.
In perpetual futures, funding rates are applied to keep the price of the contract close to spot.
If the funding rate of an asset is positive, then its contract price will be higher than its current price and traders are more likely to hold long positions.
In the opposite case, when a financial asset has a negative funding rate, there are more traders who hold short positions. The price is expected to decline by more traders than the number of traders who are buying it with an expectation that they will sell at a high price.
Long-term traders can be victims
The aforementioned is a post Santiment said that ADA may have a reason for its surge in short positions. On-chain data providers,
“This is a good sign for patient bulls, as liquidated shorts can effectively act as ‘rocket fuel’ for continued price rises.”
This is not yet the case. As ADA’s prices continue to fall, more liquidations have taken place over time than in a short period of time.
According to ADA, the 18th of June saw a total of $2.86 millions in ADA liquidations, which is its highest single-day amount since April 13th. Coinglass data.
The derivatives markets of an asset liquidate trades when the trader cannot maintain his/her position because there are not enough funds.
A long liquidation occurs when the value of an asset falls unexpectedly. This forces traders to sell their positions in anticipation of a rise in price.
ADA Sellers Control the Market
ADA may see its price continue to fall as the demand for altcoins continues to drop. AMBCrypto spotted the Relative Strength Index, or RSI of the coin as 33.53.
The price change of an asset is used to determine if it’s in overbought or oversold condition.
The range is 0 to 100. Values above 70 indicate that an asset has been overbought, and a correction in price may be imminent. Values below 30 indicate that an asset has been oversold, and could soon see a price correction.
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At 33.53, ADA’s RSI confirms that the selling pressure is greater than buying activity. If the downward trend continues, ADA could fall as low as 0.35.
If bullish bias towards the coin increases and demand rises, this will invalidate it. This could lead to a rally of the coin up until $0.41.
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Source: ambcrypto.com