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The recent substantial drop in Cardano’s price has raised concerns among investors as market sentiment turns increasingly bearish.
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This shift in sentiment is evident as Cardano’s funding rates plummet, signaling a lack of confidence in a near-term recovery.
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“A fall below the support level of $0.31 could cause further dips for Cardano,” analysts warn, highlighting the precarious position of the altcoin.
Cardano faces significant challenges as its funding rates hit a yearly low, prompting increased bearish sentiment and concerns over future price movements.
Funding Rates hit a yearly low
Cardano’s Funding Rates have recorded a steep decline in the last 24 hours and hit the lowest level in one year.
At press time, this metric stood at -49%, indicating high demand for short positions and reduced bets that ADA will gain.
Source: Coinglass
A steep decline in Funding Rates shows that traders have become bearish on the altcoin as they anticipated further declines. However, such a steep drop could lead to a potential short squeeze if the trend reverses unexpectedly.
Can Cardano bounce from a two-month low?
Cardano’s 24-hour dip has led to the price dropping to its lowest level in nearly three months. Sellers were behind this downturn, as seen in the $736M in selling volumes.
However, sellers could be close to reaching exhaustion following a decline in the Relative Strength Index (RSI) to an oversold level of 25.
ADA has also dipped below the lower Bollinger band with high volumes, which also points toward oversold conditions.
Source: TradingView
If traders begin to buy the current dip, it could trigger a trend reversal. Nevertheless, for a bullish trend to be confirmed, ADA needs to flip resistance at $0.84.
On the other hand, a fall below the support level of $0.31 could cause further dips.
Read Cardano’s [ADA] Price Prediction 2025–2026
Reduced DeFi activity could fuel the downtrend
Data from DeFiLlama showed a significant decline in activity on the Cardano network. At press time, the Total Value Locked (TVL) had dropped to $312M, marking the lowest level since early November.
This declining activity could fuel Cardano’s bearish trend. However, traders need to watch out for an uptick in DeFi activity, as that could coincide with a rally.
Conclusion
In conclusion, Cardano’s current market dynamics reflect a challenging environment shaped by low funding rates, significant selling pressure, and declining DeFi activity. Investors should remain vigilant as the altcoin’s price approaches critical support levels and could be indicative of potential future movements.
