Cardano Price Forecast: Extreme Funding Rate Signals Bear Trap as Wedge Breakout Looms

Cardano (ADA) has dropped to its lowest price since December 2020, and the funding rate heatmap is now showing aggressive short positioning that may lead to a short squeeze if a falling wedge pattern plays out.

ADA value is down 3.8% today, June 24, to trade at $0.146 at the time of writing. Trading volumes had surged by 36% to $458 million per CoinMarketCap data.

Cardano Price Falls to Six-Year Low as Shorts Become Overcrowded

A previous Cardano price analysis identified a demand zone near $0.16 that has failed to hold, and ADA is now at its lowest level since 2020. However, short sellers remain unconvinced that the downtrend is over.

The funding rate heatmap for Cardano on Coinglass shows the funding is at -12.65%, making Cardano one of the assets with the highest number of short positions.

But this is not the first time that ADA’s funding rate is falling to such an extreme negative funding because it occurred again on June 22, when the rate dropped to -20%.

The extreme negative in this rate means that the shorts side is getting overcrowded and short-sellers are being forced to pay more to keep their positions open.

The open interest that has increased by 5.47% to $374 million despite the price dropping by nearly 4% also supports that short bets are increasing.

However, these short positions might close if the price of Cardano finds support at the six-year low of $0.145.

Short sellers close their positions by buying. That means that if the price does not drop as they expect it to, they will buy, and this will push Cardano price higher.

ADA Tests Support in Falling Wedge Pattern

The price of Cardano is trading within a falling wedge pattern on the four-hour chart, but it is now testing the support at the lower boundary at $0.148.

Dropping below this support at $0.148 will make the bullish outlook that is usually portrayed in this wedge pattern invalid.

However, if Cardano can make three straight closes above $0.148 and then overcome the next obstacle of $0.15, the price might rise by 12% and reach $0.17. This 12% rise is the same as the height of the falling wedge pattern.

The RSI reading of 29 suggests that the long-term Cardano price outlook is still bearish because sellers are in control.

This outlook will shift if ADA can overcome the obstacle at the 50-day EMA level of $0.16.

Cardano Active Addresses Surge After Exploit

A project created on the Cardano network known as SecondFi lost $20 million in a hack, and this is increasing the number of Cardano active addresses.

Data from Santiment shows that the active addresses increased by 120% from 12,953 on June 22 to 28,545 on June 23.

The rise likely stems from sellers who panicked after the $20 million hack because the 4% drop seen on June 24 shows that demand is still weak.