As an experienced analyst, I believe that the heavy shorting activity on Cardano (ADA) and Ripple’s XRP is a positive sign for patient bulls. The dominantly negative longing vs. shorting ratio for both altcoins has been ongoing since September 2023 for ADA and May 2024 for XRP, which may have led traders to believe that a downtrend is likely. However, this activity could be a catalyst for price rises as liquidated shorts can act as “rocket fuel” for continued price increases.
As a crypto investor, I’ve noticed that there’s been a growing sense of excitement among us as we wait for a potential price recovery in the cryptocurrency market. However, two altcoins, Cardano (ADA) and Ripple’s XRP, have recently drawn my attention due to their high volume of short positions taken by traders after a brief relief rally.
This activity comes amidst mild hints of a rebound in their prices.
Heavy Shorting on ADA and XRP
Based on Santiment’s provided data, there have been several instances where the sentiment scores for ADA and XRP on Binance turned positive. This pattern suggests that short positions have outnumbered long positions since September 2023 for Cardano (ADA), while for Ripple (XRP), this trend began in May 2024.
Recent price increases might have made some traders think a decline is imminent, causing them to sell short on those two altcoins.
Santiment holds the view that intense short selling could serve as an encouraging sign for persistent buyers.
Two well-known cryptocurrencies, Cardano and Ripple (XRP), have experienced increased short positions among traders after recent price rebounds. This trend is advantageous for long-term bulls, as the liquidation of these shorts can serve as a powerful catalyst, propelling prices even higher.
— Santiment (@santimentfeed) June 19, 2024
This week, according to the on-chain analysis, Cardano was significantly undervalued with an MVRV (Market Value to Realized Value) ratio of -12.6%. In contrast, XRP‘s MVRV ratio was at -3.5%. The former’s finding pointed towards a highly bullish outlook for price recovery, while the latter indicated only mildly bullish conditions.
As an analyst, I’ve observed a low MVRRealized Value Ratio (MVRV) for the assets under consideration. This signifies that traders are currently holding these assets at prices below their initial purchase costs. Historically, such oversold situations have been preceded by market rebound, as the asset becomes an attractive buy due to its undervalued price.
Catalysts for ADA and XRP
Cardano is preparing for a significant development that could fuel momentum for its token. The upcoming Hard Fork named “Chang,” is anticipated to initiate the Voltaire era, marking a shift from Cardano being governed by Input Output Global (IOG) as its central authority towards a completely decentralized and community-driven infrastructure.
Announcing the same, IOG founder Charles Hoskinson recently tweeted,
“June is shaping up to be the month when the Cardano Node hits version 9.0. Once 70% of the Stake Pool Operators (SPOs) have installed this new node, a hard fork may ensue, advancing Cardano into the Voltaire Era.”
During the ongoing market slump, XRP has experienced slight upward trends. The recent increase in open interest (OI) indicates that investors are actively purchasing this asset in expectation of its price rise, as they closely monitor the legal dispute between Ripple, the blockchain company, and the US Securities and Exchange Commission (SEC).
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2024-06-20 14:44