Demand for Cardano Derivatives is on the rise, chain and market data show
As the altcoin market starts growing again and funding rates are picking up, Cardano traders and investors start to open more long positions, according to data provided by Santiment. In order to track the trader’s interest in the cryptocurrency, Santiment tracks funding rates on the Binance exchange.
With increased derivatives funding, traders might expect elevated volatility due to the increasing number of leveraged positions. A more leveraged market could help price action during an uptrend.
The downside of an overleveraged market
The main downside of elevated volatility on the market is the absence of strong support zones that practically have no time to form in the face of the rapidly rising price.
Cardano’s markets were consistently over-leveraged during the previous bull run. Right after the market entered the correction phase, ADA faced a 30% retrace and has not recovered to date.
Over the past month, average weekly volatility on ADA has remained around 8%, while in the post-smart contract announcement phase, average volatility has remained around 20%.
The main advantage for traders
Since current market sentiment for ADA remains neutral, an increase in volatility might lead to both positive and negative outcomes. But according to Binance data, there are more long open than short ones. With additional longs funded and the absence of selling pressure, the price of the asset might rise further.
Currently, only 61% of ADA holders remain profitable, indicating that 40% of all holders have opened their positions at a higher price. On-chain data also suggests that more selling pressure might appear on the market once the price comes close to the previous ATH.
