The recent sharp rise in the prices of XRP and ADA can be attributed to a surge in short positions. While this trend is seen as encouraging for market confidence, analysts caution that it may also introduce significant volatility.
Cardano (ADA) experienced a sudden surge of over 4% before retracing into negative territory at $0.39, while XRP rose by 3% within 24 hours to reach $0.49.
Analyzing this unexpected rally, crypto market intelligence platform Santiment revealed that it was driven by a new wave of short positions. Traders apparently lacked confidence in the relief rally sparked by the recent decision of the US Securities and Exchange Commission (SEC) to drop its investigation into Ethereum. According to data, ADA saw its most pronounced ratio of shorts versus longs in nine months, with XRP also recording its highest bearish to bullish bet ratio in over a month.
According to Santiment, heavy shorting exerted downward pressure, pushing both ADA and XRP into negative territory on Wednesday night. Despite this, Santiment views this behavior positively for bullish traders, noting it could lead to significant liquidation and a short squeeze if the market moves against these positions. Conversely, if short sellers exit with buy orders, it could further drive up prices.
ADA and XRP are among the prominent altcoins witnessing substantial short interest following relief bounces, which could potentially fuel further price increases.
CryptoQuant’s report on XRP and ADA highlights a notable increase in Open Interest for XRP, indicating growing market confidence and heightened trading activity. However, while this suggests a bullish sentiment and potential price appreciation, CryptoQuant warns that Open Interest can also contribute to market volatility.
In contrast to rising Open Interest, sentiment among the crowd has significantly declined for Cardano, Shiba Inu, and Dogecoin following their respective price drops. Patient traders awaiting a buy opportunity in these major altcoins may find this sentiment downturn favorable, especially with FOMO reportedly at its lowest in 2024.
Amidst these bullish signals, the XRP spot market recorded a significant outflow of $102.7 million on June 19 as holders sold assets to reduce exposure. On the other hand, ADA’s Open Interest has steadily increased since May 2024, growing from $190 million on May 1 to $268 million on June 6.
Beyond market data, Charles Hoskinson of Cardano has outlined plans for blockchain governance, including the implementation of decentralized representatives (dReps) expected within 90 days post-Chang hard fork. This follows a recent Crypto News Flash disclosure about the imminent transfer of Cardano’s $681.9 million treasury to the community.
Ripple continues to pursue a favorable outcome in its legal battle against the SEC, with potential implications for its price trajectory.
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