Cardano [ADA] Faces Downside Risk as Bullish Momentum Fades

Cardano [ADA] has been trading within a tight range, defending the horizontal support at $0.63 while being capped by a descending trendline. This price action indicates a critical standoff between buyers and sellers, with neither side showing decisive control. Despite temporary rebounds, the bulls have failed to push above the resistance zone, raising the likelihood of a breakout or breakdown in the near term. Traders are closely monitoring this structure, especially as market volatility begins to build across other major altcoins.

Cracks in trader confidence are beginning to show. The OI-Weighted Funding Rate has declined steadily over the past few days to +0.0017%. Although it remains in positive territory, the visible decrease reflects a reduction in bullish conviction among leveraged traders. This subtle shift suggests that traders are becoming more cautious, despite remaining on the long side. Meanwhile, the Binance Long/Short Ratio showed 71.97% of traders were long on ADA, with just 28.03% holding short positions. This imbalance signals extreme optimism, which may expose the market to a potential long squeeze if ADA fails to hold its support. When the majority of traders are positioned in one direction, unexpected volatility often punishes the crowd.

The Spot Taker CVD remains “Taker Buy Dominant,” indicating that market buys continue to outweigh sells. This trend reflects aggressive buying pressure from spot traders, often preceding upward momentum when supported by volume. However, the price has yet to break above key resistance zones, suggesting that buyers may be struggling to maintain control. If demand weakens while resistance holds, it could invite renewed selling interest. Therefore, the continuation of this metric is critical for any bullish breakout to materialize.

Early warning signs are evident. The RSI hovered at 39.15, just above oversold territory, while the MACD showed a bearish crossover below the zero line. Together, these readings showed fading bullish strength. The combination of low RSI and a declining MACD histogram suggests reduced buying strength and the possibility of an impending correction. These technical warning signs must not be overlooked, especially as ADA remains compressed within its range. Liquidation Heatmap data revealed dense clusters between $0.68 and $0.72, suggesting that these levels are filled with stop-losses and liquidation triggers. A breakout above this zone could ignite a short squeeze, forcing rapid upward movement. Conversely, repeated failure to reclaim this range may trigger aggressive selling as bears regain control. These clusters act as pressure points and often precede sharp volatility.

Given the current setup, ADA appears more likely to break down from its squeeze than break out. Momentum metrics weakened, funding trended lower, and buyers struggled to push through key levels. While liquidation clusters above $0.68 could fuel a short squeeze if triggered, the failure to reclaim that level and the risk of overleveraged longs point to a downside scenario. Unless bulls regain strength fast, ADA risks slipping below $0.63 and triggering a cascade of liquidations.