It is important for altcoin investors to consider which cryptocurrencies traders are heavily shorting. This is particularly valid when large exchange funding rates fall below zero. Assets in such a state right now are Cardano, Chiliz and Fantom. The possibility of liquidations can rise dramatically as a result of these negative funding rates, which could serve as rocket fuel for price increases.

A struggle to sustain upward momentum is seen in Cardano’s recent price movements. ADA is struggling to maintain above critical support levels, with the 50 EMA (blue), 100 EMA (orange) and 200 EMA (black) offering vital support levels. The stock is currently trading at $0.3970.

A possible bearish trend if support levels fail to hold is suggested by the failure to break above the 200 EMA, which is a cause for concern. On-chain metrics, however, offer a more sophisticated perspective. A total of 69% of addresses with ADA are out of the money, or unprofitable, according to data, while 25% of addresses with ADA are in the money or profitable at the moment.

This imbalance suggests that many traders may be considering selling their positions should the price fail to rise, which could result in a wave of liquidations. Additionally, over the last five weeks, ADA funding rates on Binance have been continuously negative. As liquidations take place, assets that have sustained negative funding rates historically experience short squeezes.

If short positions are compelled to cover it, this could result in a quick and dramatic price increase for Cardano. As shown by the Santiment chart, ADA, saw significant price increases following liquidation during prior instances of intense shorting. For example, ADA experienced a 10% increase following a strong shorting phase earlier in the year. This historical background raises the possibility of a similar pump in the foreseeable future.