The Potential for a Cardano Price Breakout: Derivatives Traders Place Bullish Bets

The Potential for a Cardano Price Breakout: Derivatives Traders Place Bullish Bets

Cardano price has witnessed a noteworthy rebound, surging to $0.54 from a 50-day low of $0.43 on January 23. This swift recovery has sparked optimism among speculative traders who are now betting on further gains. Despite the sell-the-news cycle that caused the global crypto market capitalization to shrink by over $270 billion between January 11 and January 23, the past week has witnessed an increase of $180 billion, instilling hope for the altcoin markets. Notably, prominent Layer-1 coins like Solana (SOL), Avalanche (AVAX), and Cardano (ADA) have led the rally with gains of 24.1% and 20.2%, contributing $14.9 billion in market capitalization between January 23 and January 30. Although ADA’s price has only seen a 16% jump within the same period, derivative market data analysis suggests that Cardano may be preparing for a major breakout.

While the recent performance of Cardano and other mega-cap layer-1 coins in the spot markets has drawn attention, a deeper analysis of derivatives trading reveals unusually large bullish bets being placed on ADA’s imminent price breakout. CoinGlass’s funding rates metric, which monitors changes in fees paid by futures contract holders to opposing parties, provides valuable insights into market dynamics and trader sentiment. Positive funding rates imply that LONG position holders are paying short traders to keep their positions open, as they anticipate price increases and larger profits.

The recent surge in Cardano’s open-interest weighted funding rate, rising by a staggering 800% to reach 0.09% on January 30 after maintaining an average of 0.01% since January 2, is evidence of bullish speculative traders willing to pay record fees to keep their LONG ADA positions active. Such a rapid increase in positive funding rate often indicates that traders are reacting swiftly to a bullish catalyst. Given the strong bullish momentum observed in other layer-1 altcoin markets, it suggests that traders are placing significant bets on ADA’s price, aiming to catch up with AVAX and SOL, which have displayed superior performance.

The chart displaying the historical data trend confirms that Cardano’s price tends to rise whenever the Cardano funding rate experiences comparable spikes. From an on-chain perspective, the current uptrend in Cardano’s price can be attributed to the bullish market conditions surrounding altcoins. Moreover, the rising funding rates further serve as a potential catalyst to propel ADA’s price even higher.

Additionally, the Parabolic Stop and Reverse (SAR) technical indicator supports the prediction of a Cardano price breakout. When the Parabolic SAR dot is positioned below the asset’s current price, it indicates a growing bullish momentum. In this case, the ADA Parabolic SAR dot pointing to $0.45 while the current price is $0.52 aligns with the bullish on-chain prediction. Traders may interpret this as an opportunity to buy or signal to go long in the derivatives markets, expecting further appreciation in Cardano’s price.

If the predicted breakout scenario materializes, bears could initially provide resistance at the $0.55 milestone price. However, a decisive breakout beyond this level could trigger margin calls and short squeeze alerts, potentially propelling ADA prices above $0.65 for the first time since 2024.

On the contrary, bears could invalidate this optimistic price forecast if there is a downward movement below $0.40. Nevertheless, considering the support at $0.45, it may prove challenging for the bears to force a significant downswing in Cardano’s price.

The recent recovery and optimistic outlook for Cardano’s price, driven by the derivatives market data and the performance of other layer-1 altcoins, indicate the potential for a major breakout. While the exact trajectory remains uncertain, traders and investors are closely monitoring the funding rates and technical indicators to gauge the likelihood of ADA’s price appreciation.


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