Cardano and Ripple see an increase in shorts but Santiment reveals how this is bullish

Santiment noted that short positions involving Cardano and XRP are dominant, suggesting that this indicator could be bullish for both assets.

Well-known altcoins Cardano (ADA) and XRP have both seen significant declines following the recent market crash. However, analytical insights from Santiment suggest that these assets could be seeing a bullish turn. As traders continue to short these cryptocurrencies heavily, certain technical indicators suggest that a rebound could be imminent.

Short positions increase for Cardano and XRP

Santiment recently noted that Cardano and XRP are currently among the most notable altcoins facing a lot of short activity. Despite the recent recovery, traders are still betting short on these assets. Santiment sees this as a positive sign, believing that the liquidation of short positions could be a catalyst for a sharp price increase.

For Cardano, the accompanying chart data shows that Binance’s funding rate is -0.013743, indicating that short positions are dominant. Furthermore, derivatives data from analytical resource Coinglass shows that ADA’s long-short ratio is at 0.9755, confirming the increase in short positions.

Interestingly, despite the surge in short positions, the long-short ratio for Binance accounts is significantly higher at 2.51. The divergence suggests that, despite traders opening more short positions, there are still more Binance accounts betting on price increases than those betting on further declines.

For XRP, a similar situation has emerged. Binance’s funding rate is -0.002935, indicating more short positions. Data from Coinglass shows that XRP’s long-short ratio is 0.9623. However, the long-short ratio of Binance accounts is 2.98, reflecting that individual traders are optimistic on Binance.

Potential for a quick rebound

Santiment explained that when traders are heavily short an asset, any upward price momentum could trigger covering of short positions. This in turn could lead to a rapid and large price increase as short sellers are forced to buy back the asset to cover their positions.

Further supporting the bullish view, a previous analysis by Santiment discussed the 30-day market value to realized value (MVRV) ratio of ADA and XRP. This metric compares an asset's market value to its realized value. A low MVRV ratio indicates that the asset is undervalued and often foreshadows a price rebound.

Santiment revealed that for XRP, the 30-day MVRV is -3.5%, which is slightly bullish. Cardano’s 30-day MVRV is even lower at -12.6%, which is classified as Very Bullish. These figures suggest that both cryptocurrencies have significant upside potential in the near term, as undervalued assets typically attract buying.

Recent price action further suggests the potential for a recovery. XRP has only grown by 0.42% in the past 24 hours and is currently trading at $0.4932. Meanwhile, Cardano has grown by 0.34% in the same period and is trading at $0.38. These small gains could be early signs of a broader market recovery.

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