Santiment, a prominent analytics firm, has drawn attention to the high number of short positions on Cardano (ADA) and XRP, suggesting that this could actually be a bullish sign for both cryptocurrencies. Despite experiencing significant declines in the aftermath of the recent market collapse, there are indications that these altcoins may be poised for a turnaround. Santiment’s analysis reveals that traders are heavily shorting ADA and XRP, which could potentially lead to a substantial price increase if these positions are liquidated.
The data shows that Cardano and XRP are among the most heavily shorted altcoins at the moment. Despite some relief bounces, traders are still betting against these assets. However, Santiment views this as a positive signal, as the closing of these short positions could act as a catalyst for a significant price rise.
Specifically, the Binance Funding Rate for Cardano is currently -0.013743, indicating a predominance of short positions. Additionally, derivatives data from Coinglass confirms the increase in shorts, with a long/short ratio for ADA at 0.9755. Interestingly, the Binance long/short ratio for accounts is much higher at 2.51, suggesting that there are more traders betting on a price increase rather than further declines.
For XRP, the Binance Funding Rate is -0.002935, indicating a similar pattern of short positions. Coinglass data shows a long/short ratio for XRP at 0.9623. However, the Binance long/short ratio for accounts is 2.98, indicating a more optimistic stance from individual traders.
Santiment explains that heavy shorting activity creates a situation where any upward movement in price can trigger short covering, leading to a rapid and substantial price increase as shorts are forced to buy back the asset. Furthermore, previous analysis from Santiment has shown that both ADA and XRP have low 30-day Market Value to Realized Value (MVRV) ratios, suggesting that they are undervalued and likely to experience a price rebound.
The 30-day MVRV for XRP is at -3.5%, classified as mildly bullish, while Cardano’s 30-day MVRV is even lower at -12.6%, categorized as very bullish. These figures indicate that both cryptocurrencies have significant upside potential in the short term, as undervalued assets often attract buying interest.
Recent price movements also support the potential for a recovery. XRP has seen a modest gain of 0.42% in the past 24 hours, currently trading at $0.4932. Similarly, Cardano has increased by 0.34% during the same period, with a current price of $0.38. These small upticks could be early signs of a broader market resurgence.
It’s important to note that this article is for informational purposes only and should not be considered financial advice. The views expressed in this article are the author’s personal opinions and do not necessarily reflect the opinions of The Crypto Basic. Readers are advised to conduct their own research before making any investment decisions, and The Crypto Basic is not responsible for any financial losses incurred.
