The recent surge in the price of XRP and ADA can be attributed to a growing wave of short positions. While this may instill market confidence, analysts warn that it could also lead to increased market volatility.
Cardano (ADA) experienced a sudden surge of over 4% before dipping back into the “red zone” and trading at $0.39. Similarly, XRP saw a 3% jump in just 24 hours, reaching $0.49.
Santiment, a crypto market intelligence platform, revealed that this unexpected rally was triggered by a new wave of opened short positions. Traders did not find enough confidence in the relief rally caused by the US Securities and Exchange Commission’s decision to withdraw its security probe into Ethereum. Data shows that this is the highest shorting vs longing ratio for ADA in the past nine months, while XRP’s bearish to bullish bet ratio is at its highest in over a month.
This heavy shorting resulted in downward pressure, pushing both ADA and XRP into the “red zone” on Wednesday night. Santiment believes that this behavior is a positive sign for bullish traders, but it could also lead to significant liquidation and a short squeeze if the market moves against these positions. Conversely, if short sellers exit their positions with buy orders, it could drive the price up.
Cardano and XRP are among the altcoins that are seeing heavy shorting from traders following relief bounces. This is a promising sign for patient bulls, as the liquidation of shorts can fuel continued price rises.
Another report by CryptoQuant highlights that Open Interest in XRP has been increasing, indicating growing market confidence and heightened trading activity. However, Open Interest is a double-edged sword that can also contribute to market volatility.
Contrary to the rise in Open Interest, crowd sentiment has fallen significantly for Cardano, Shiba Inu, and Dogecoin. This could present a buying opportunity for patient traders who have been waiting for the crowd to give up on these altcoins.
In addition to market data, Cardano’s Charles Hoskinson has disclosed plans for the Cardano blockchain governance, including the implementation of decentralized representatives (dReps). This is expected to be completed within 90 days after the Chang hard fork. Furthermore, Cardano’s treasury, valued at almost $681.9 million, is set to be transferred to the community.
Ripple is also actively pursuing victory in its court case against the SEC, with a favorable outcome expected to significantly impact the price.
Overall, the recent surge in XRP and ADA prices is driven by short positions, which can have both positive and negative implications for the market. The market data and developments surrounding Cardano and Ripple further contribute to the current dynamics in the crypto space.